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Tron‘s Decentralised USD (USDD/USD) stablecoin dipped below $0.97 on Monday to touch its lowest level sincethe market turmoil of June 2022.
As per data from market tracking site CoinGecko, USDD’s value depegged to $0.9695, declines in the stablecoin’s value coming amid broader market jitters around cryptocurrency exchanges. The overcollateralised US dollar-pegged stablecoin’s fresh stumble follows a month of struggle to re-establish the 1:1 peg.
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By Monday, USDD has been depegged for 50+ days, unable to regain the $1 peg lost in the days leading to the collapse of cryptocurrency exchange FTX.
UST was another algorithmic stablecoin
USDD’s violation of the 3% threshold for a de-peg has the market looking back to events that preceded the collapse of another algorithmic stablecoin – the Terra USD (UST). The violent depegging of the stablecoin also saw the native Terra token LUNA go to zero, sparking contagion that reverberated across the crypto market and led to the death of several leading crypto companies.
Like UST, USDD is an algorithmic stablecoin that’s programmed to maintain its peg to the underlying asset. In this case, USDD’s dual token system sees the minting and burning of Tron (TRX) – with the principle of supply and demand kicking in when prices fluctuate.
As such, the stablecoin’s depeg to $0.9695 created an opportunity for traders to buy USDD at lower prices and redeem these for TRX at a profit of $0.04 per token. But USDD’s struggles to close the gap to the dollar has the crypto market wondering whether this could be UST 2.0.
Tron founder Justin Sun sees no such eventuality with USDD, noting on Twitter that there is more capital being deployed to defend the stablecoin. Sun also highlighted that USDD is at over 200% collateralised ratio, with assets allegedly worth over $1.45 billion also safeguarding the USDD peg.
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