Tron DAO Reserve Uses USDC to Protect USDD Peg

 Tron DAO Reserve Uses USDC to Protect USDD Peg 

As the turbulence in the current crypto market unfolds after the Terra UST fallout, many eyes have shifted to the new drama emerging from the Tron-based algorithmic stablecoin USDD. On June 13, the crypto asset Tron (TRX) dropped significantly in value. Tron’s founder, Justin Sun, spoke about traders shorting the digital currency. He explained that the Tron DAO Reserve would deploy $2 billion to "fight them," and he is hopeful that the shorters may not last beyond 24 hours. The stablecoin USDD took a slide on Monday, dropping to $0.977 per unit during the crypto market carnage.

USDD Slides to $0.97, USDC Deployed to Defend the $1 Parity

On one of the blackest Mondays in the world of crypto assets, the stablecoin USDD fell to $0.97 per unit and the Tron DAO Reserve had to deploy funds to defend the $1 parity. "For the market's extreme condition, [Tron DAO Reserve] has received 700 million USDC to defend [the] USDD peg." "Now the USDD collateralization rate is nearly 300%," the organization tweeted.

While a quick dip to $0.97 isn’t the biggest deal to some investors, and USDD moved back to the $0.99 region, the same thing happened to UST the day before the massively larger de-peg. It is also being said that Tron’s native asset TRX is being heavily shorted by traders, and Justin Sun explained that $2 billion would offset the shorters causing a short squeeze.

"Funding rate of shorting TRX on Binance is negative 500% APR," Sun tweeted. "[Tron DAO Reserve] will deploy 2 billion USDC to fight them. I don’t think they can last for even 24 hours. [A] short squeeze is coming," he added.

Sun Believes Over-collateralization Will Make Market Participants 'More Comfortable' With USDD

Then the Tron DAO Reserve announced several purchases meant to defend the peg. After the 700 million USDC was purchased, the organization bought another 100 million USDC, and then another 100 million USDC after that.

"Currently USDC supply on TRON has reached $2.5 billion," the Tron DAO Reserve remarked after adding 650 million USDC to the reserve. Tron claims that USDD backing will be over-collateralized by at least 130%, and Sun believes this method will make investors more comfortable with the stablecoin.

"We want to have USDD be over-collateralized, which I think will make market participants more comfortable about using us in the future," Sun told Bloomberg on June 5.