Cardano Founder Expresses Discontent as Tron’s USDD Loses Bitcoin Backing The Crypto Basic
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Tron’s USDD stablecoin fell below $0.97 today, and founder Justin Sun has tried to reassure users by saying that he is “deploying more capital” to defend the peg.
Tron’s USDD Stablecoin Depegs To Lowest Value Since June 2022
Tron’s Decentralized USD (USDD), which had already been struggling with its peg this last month as it stayed below $1, has observed further destabilization today as it touched lows not seen since June.
Below is a chart that shows the trend in the stablecoin’s price (against USD) over the last 24 hours:
Looks like the price of the coin has jumped back up following the decline | Source: USDDUSD on TradingView
As the above graph shows, USDD declined to as low as below $0.97 earlier in the day, but has since seen some recovery to around $0.977.
Justin Sun, the founder of TRON, has come forth and tried to reassure users by pointing out that the stablecoin is secured by a collateral ratio of more than 200%.
Additionally, Sun also informed users that he is “deploying more capital” to defend the peg.
Deploying more capital – steady lads https://t.co/55pra5wQMi https://t.co/CexyaBy2hx
— H.E. Justin Sun
(@justinsuntron) December 12, 2022
Before the Tron founder added these extra deposits, the collateral ratio of the stablecoin was around 200.71%. Now, the crypto has become even further overcollateralized as the ratio has improved to 200.88%.
The overcollateralization of the decentralized USD stablecoin | Source: USDD.io
While USDD seems to have stopped from further depegging for now, it’s still unclear whether the coin will be able to regain $1 anytime soon.
Since the collapse of the crypto exchange FTX, the stablecoin hasn’t been able to stabilize its peg. Other stables also saw turbulence from the crash, but the depegging was only temporary in their case, as they were back up quickly enough.
Decentralized USD is a stablecoin issued by the TRON DAO reserve, and is collateralized by the organization using multiple assets like Bitcoin, Tron, and USDT.
The crypto’s model is similar to Terra USD (UST), a stablecoin that lost its peg and collapsed back in May of this year (an event that would kick off a market-wide crash).
After USDD slipped further away from its $1 peg today, there have been speculations in the crypto community on whether the stablecoin is heading towards a similar fate to UST.
If USDD does indeed end up following the path of UST, the domino effect on the market from its collapse is unlikely to be on the same level as Terra USD’s, given that the market cap of USDD is currently nowhere near what UST was just before it went down.
Crypto Flipsider News – Bitcoin Crash, USDD Depegged, BlockFi Lays Off Staff, Investors Sue Binance, Cardano Launches EVMRead in the Digest:
- Crashes to 18-Month Low, Liquidating $1.25 billion; Binance Pauses Withdrawals
- USDD Suffers De-Pegging Fears, Declines, Says Celsius Withdrawal Restriction Doesn’t Affect USDT
- BlockFi Lays Off 20% of Its Staff Amidst Cryptocurrency Market Downturn
- Investors File Lawsuit Against Binance for Advertising Terra UST as ‘Safe’
- Launches New Permissionless EVM Sidechain on Testnet
Bitcoin Crashes to 18-Month Low, Liquidating $1.25 Billion; Binance Pauses Withdrawals
Bitcoin was hit with its third hardest sell-off of the decade after the U.S. announced that the inflation rate had risen to a four-decade high of 8.6%. Since the announcement was made last Friday, the price of Bitcoin has fallen by more than 30%.
The 7D price chart of Bitcoin (BTC). Source: CoinMarkketCap
On Monday, June 13, the price of Bitcoin fell by as much as 15% to hit a low of $20,950, its lowest value since December 2020. Marginal gains over the last 24 hours have pushed the price of Bitcoin back up to $22,300.
The 1D price chart of Bitcoin (BTC). Source: CoinMarketCap
Over the last 24 hours, $1.24 billion in positions have been liquidated due to the sharp downswing. Bitcoin contributed over $600 million to the liquidation. An XBTUSD perpetual contract on BitMex of $4.4 million was the largest single liquidation in that period.
At the peak of the sell-off, Binance announced that it had temporarily suspended withdrawals on the Bitcoin (BTC) network on June 13 at 11:43:43 (UTC). The news caused the price of Bitcoin to fall even harder.
Flipsider:
- Binance has now resumed withdrawals of BTC on the Bitcoin network after processing all pending transactions.
USDD Suffers De-Pegging Fears, Terra Declines, Says Celsius Withdrawal Restriction Doesn’t Affect USDT
With the crypto industry still recovering from the infamous implosion of the algorithmic TerraUSD (UST) stablecoin, investors were hit with another major scare as Tron’s decentralized USD (USDD) stablecoin was briefly de-pegged.
On Monday, June 13, Tron’s USDD price dipped to $0.97, mirroring the days before UST’s collapse. Data tracker showed that the brief de-pegging of UDDD was the result of attacks from hedge funds.
The 24-hour price chart of Decentralized USD (USDD). Source: CoinMarketCap
Nansen reported that one of the funds that capitalized on the UST depeg started actively transferring large amounts of USDD (between $200,000 and $12,000,000) and other stablecoins. Tron DAO reacted quickly, injecting 700 million USDC to restore the USDD pegged to the dollar.
The world’s biggest stablecoin, Tether’s USDT, has again lost its dollar peg owing to the freeze of all withdrawals on Celsius’s lending platform. USDT now trades at $0.9989 after dropping as low as $0.9975.
The 7D price chart of (USDT). Source: CoinMarketCap
Flipsider:
- Amidst the panic, Tether has issued a statement, clarifying that Celsius has “always been overcollateralized” and the withdrawal pause “has no impact” on the reserves of USDT.
Why You Should Care
The ongoing inflation scare puts crypto in a fragile position, and the de-pegging of any major stablecoin could be catastrophic for the nascent industry.
BlockFi Lays Off 20% of Its Staff Amidst Cryptocurrency Market Downturn
The Zac Prince-led BlockFi has become the latest prominent name to cut down its staff size due to the continuous fall in the value of the cryptocurrency market.
BlockFi, a crypto lending platform, announced Monday that it would reduce its workforce by about 20%, while digital currency exchange, Crypto.com, reported a 5% reduction on Friday.
BlockFi explained that the “dramatic shift in macroeconomic conditions worldwide” has negatively affected the firm’s growth. As a result, Block will be laying off approximately 850 employees or 20% of its workforce.
Flipsider:
- Zac Prince, CEO of BlockFi, announced via a tweet on Monday that the company is dedicated to sticking around for the long haul.
Why You Should Care
The prolonged downturn in cryptocurrency prices has affected the profit of crypto firms, leading to the increasing layoffs of staff.
Investors File Lawsuit Against Binance for Advertising Terra UST as ‘Safe’
The ripple of the Terra ecosystem collapse continues to cause turbulence in the crypto industry, with investors in California now filing a class-action lawsuit against Binance US for false advertising of TerraUSD (USD).
The case was filed by the law firm Roche Freedman LLP and accused Binance US of misleading investors and selling unregistered securities to roughly 2,000 plaintiffs. The filing claims that Binance sold the “algorithmic stablecoin” TerraUSD (UST) as “safe.”
The lawsuit points to the adverts Binance ran on its platform, marketing the UST stablecoin as safe. The latest of these adverts was run in April, but the UST lost its dollar peg in May, ultimately leading to the collapse of the Terra ecosystem.
In addition, Binance US is being accused of not being committed to its customers by not complying with U.S. federal and state securities laws when it listed the now-defunct TerraUSD (UST).
Flipsider:
- Although the lawsuit names LUNA and UST, neither Binance nor the cryptos are registered with the U.S. SEC.
Why You Should Care
The lawsuit adds more pressure on Binance, which is already being probed by the SEC over the 2017 launch of its native token, .
Cardano Launches New Permissionless EVM Sidechain on Testnet
IOG, formerly called Input Output Hong Kong, the software company behind the Cardano ecosystem, has announced the launch of its permissionless Virtual Machine (EVM) sidechain alpha on the testnet.
The permissionless sidechain will enable developers to write solidity-based applications on the Cardano network and create EVM-compatible DApps and ERC20-compatible tokens while enjoying many of Cardano’s benefits.
The EVM sidechain will be fully compatible with Ethereum upgrades, tools, and wallets while inheriting security from Cardano’s mainnet. IOG did not specify if the EVM compatibility would be directly deployed to its mainnet one day.
The Senior Content Editor of Input-Output Global (IOG), Eric Czuleger, said the community believes in “an interoperable future” that will permit several blockchains to communicate.
Flipsider:
- The launch has set Cardano’s ADA on a rally opposing the bearish trend. Over the last 24 hours, ADA has gained 13%, spiking to $0.51.
The 24-hour price chart of Cardano (ADA). Source: CoinMarketCap
Why You Should Care
This means that dApps developed on Ethereum could be seamlessly transferred to Cardano.
The Tron price crashed hard as investors reacted to the rising risks of its stablecoin that is known as USDD. The TRX token crashed to a low of $0.055, which was the lowest level since January this year. It has crashed by more than 32% from its lowest level in May this year.
USDD de-pegging
Tron is one of the best-known blockchain projects globally. It is a platform that was started by Justin Sun, a computer programmer who paid millions to have lunch with Warren Buffett.
Today, Tron has become a leading blockchain operating system that powers stablecoins worth billions every day. It is also a key player in the Decentralized Finance (DeFi) as the total value locked (TVL) in its ecosystem has surged. It is now the third-biggest player in the sector after Ethereum and BNB Chain.
Tron also recently became a big player in the stablecoins industry as the developers launched a new coin known as USDD. It is an algorithmic coin that has a close resemblance to the now-dead Terra USD.
USDD saw a lot of growth as its total market cap jumped from zero to over $750 billion in less than two months. Investors bought the coin even as risks of de-pegging remained since it is not backed by anything.
Learn more about how to trade Tron.
Now, it seems like these risks are coming to life as the price of the USDD stablecoin moved below $1 for the first time on record. At the time of writing, the coin is trading at $0.98, giving it a market cap of $711 million.
Therefore, in my view, I believe that USDD is the biggest risk that Tron’s TRX faces. Since it is not backed by anything, there is no reason to believe that its price will not de-peg as happened with Terra.
Tron price prediction
The daily chart shows that the TRX price has been in a strong bullish trend in the past few months. It even defied gravity as other coins crashed. The coin found a lot of resistance at $0.092, which was along the upper line of the ascending channel.
A closer look at the chart shows that the coin has now moved below the lower side of the channel and crossed the 25-day and 50-day moving averages. The Relative Strength Index (RSI) has also crashed below the oversold level.
Therefore, there is a likelihood that the Tron price will continue falling as bears target the next key support at $0.05.
Tron has had a spectacular month in May even as other cryptocurrencies have pulled back and others crashed. The TRX token is trading at $0.081, which is about 30% above the lowest level this month. As a result, its total market cap has risen to about $7.6 billion, making it the 13th biggest coin in the world.
Tron’s successes in May
Tron has seen its ecosystem grow rapidly in May. A good way to look at this is to view the performance of its DeFi ecosystem. According to DeFi Llama, Tron’s total value locked has jumped to more than $5.6 billion.
This growth has made it the third-biggest player in the industry after Ethereum and BNB. The most successful projects in its ecosystem are JustLend, JustStables, and SunSwap. As such, investors now believe that the ecosystem will continue growing in the future.
The other reason why the Tron price has done well this month has been its newly launched stablecoin known as USDD. According to CoinGecko, the USDD token moved from zero to over $576 million. This makes it the 89th biggest coin in the world.
Still, USDD poses the biggest risk to Tron’s ecosystem. Like TerraUSD, USDD is an algorithmic stablecoin that looks like a UST clone. It is not backed by any real assets like the US dollar. Instead, its stability is based on algorithmic rebalancing.
As a result, USDD faces the same risks that UST and Neutrino faced before. In other words, since there are no assets backing the stablecoin, if it crashes, holders will lose all their tokens.
Tron price prediction
Turning to the four-hour chart, we see that the TRX price has been in a strong bullish trend lately. This rebound has been supported by the 25-day and 50-day moving averages. It has also retested the important support level at $0.0800, which was the highest level on March 31st.
A closer look shows that the coin is forming a cup and handle pattern, which is usually a sign of a bullish continuation. Therefore, there is a likelihood that the coin will keep rising as bulls target the key resistance level at $0.09, which is the upper side of the cup.
The Tron price has been a bit volatile in the past few days as worries about its newly launched USDD stablecoin that has a close resemblance to Terra USD. The coin is trading at $0.069, which is about 25% below the highest level last week. Its total market cap has declined to about $6.82 billion.
USDD concerns remain
The biggest story in the cryptocurrency this month was the collapse of Terra USD, the third-biggest stablecoin in the world. At its peak, it was the third-biggest stablecoin in the world after Tether and USD Coin.
Another big story was the launch of USDD Coin by Tron. USDD is a stablecoin that closely resembled Tron USD in that it is not backed by US dollars. Instead, it is an algorithmic stablecoin that automatically rebalances when it moves below or above $1.
USDD has been one of the most successful stablecoin launches ever. In less than three weeks, its total market cap has jumped to over $310 million. This makes it one of the biggest stablecoins in the world and the 147th biggest coin globally.
Read more on how to buy Terra Luna.
The TRX price has declined because of worries of the USDD stablecoin. With algorithmic stablecoins like DEI, Neutrino, and Terra USD losing their peg, there are concerns that USDD also could do the same. For now, however, the coin’s peg has held relatively well and has ranged between $0.998 and $1.01.
Tron price has also declined because of the weak performance of its DeFi platform. Like all platforms, its total value locked has crashed hard in the past few days. It has dropped slightly to about $4.2 billion, making it the 4th biggest chains in the world.
Tron price prediction
Turning to the four-hour chart, the TRX price jumped to a high of $0.092 as demand for the USDD coin rose. In the past few sessions, however, the coin has retreated sharply and moved below the 25-day and 50-day moving averages. The coin remains above the ascending trendline that is shown in black.
Tron’s Stochastic Oscillator has moved slightly above the neutral level at 50. Therefore, the outlook for the Tron price is a bit bearish, with the next key support level being at $0.065. A move above the resistance at $0.0072 will invalidate the bearish view.
Founder of TRON Justin Sun announced the launch of an algorithm stablecoin on this network. Called USDD, the digital asset will be deployed on May 5, 2022, and will offer users a basic “risk-free” interest rate of 30% annual percentage yield (APY).
Related Reading | TA: Bitcoin Technicals Suggest Bulls Aim Sharp Move Above $42K
The stablecoin will be available on TRON, but users can access it from Ethereum and the Binance Smart Chain. According to the open letter, the digital asset will be launched in partnership with “major blockchain players” and will be “the most decentralized stablecoin in human history”. Sun said:
TRON is starting a self-imposed revolution, pooling all its resources to create USDD, a fully decentralized stablecoin underpinned by mathematics and algorithms, bringing the development of stablecoin to the next level.
The stablecoin will be managed by the TRON DAO and “other major blockchain institutions” and will maintain a 1:1 pegged to the U.S. dollar with, as Sun explained, “proper algorithms in a decentralized manner” and “by applying mathematics”.
The stablecoin will operate with a similar mechanism to Terra’s UST. Users will be able to redeem 1 USDD for 1 USD worth of TRX when the stablecoin drops below its peg. They can do the opposite if the price of the stablecoin rises about its $1 pegged.
The stablecoin will follow a four-stage roadmap. The first stage will be called Space, the following International Space Station (ISS), then Moon, and finally Mars. Sun only provided details on the first two stages which mainly centered around USDD’s management and the strategies that will try to keep the stablecoin’s pegged.
What’s TRON Ultimate Goal With Their Stablecoin?
The launch of TRON’s stablecoin is part of a “self-imposed revolution” that will take these digital assets to their next stage, according to Sun. This movement is supposed to provide users with a way out of the centralized system. Sun wrote:
The decentralized stablecoin USDD will free holders from central authorities’ arbitrary impositions and eliminate all entry barriers. Unlike centralized institutions that may freeze or confiscate users’ funds at will, decentralized stablecoins effectively safeguard private property rights.
TRON claims that it wants to provide “equitable” access to financial services for people around the world. In that sense, Sun said TRON will be “one of the strongest cornerstones for the fifth freedom of humanity”.
This announcement has caused controversy in the crypto community. Some users accused Sun of copying Terra’s UST model.
The founder of Terra and CEO at Terraform Labs, Do Kwon, welcomed the initiative and hinted at a potential partnership with TRON.
At the time of writing, TRON trades at $0.07 with a 15% rally in the last 24-hours. The cryptocurrency is possibly reacting to the announcement and the general sentiment in the market.
Related Reading | TA: Ethereum Could Stage Strong Rally If It Clears This Key Resistance
If launched successfully, USDD will provide its users with the largest APY for staking a stablecoin in the crypto ecosystem. This would surpass Terra’s Anchor Protocol’s 19% APY, and the upcoming NEAR’s 20% APY, if it launches.
