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USDD depegged last week and is showing no sign of recovery
Founder Justin Sun says the Curve pool is operating normally; evidence shows otherwise
Justin Sun speculates Alameda is behind USDD depegging
Tron network’s USDD stablecoin depegged on November 9, 2022, and fell below 97 cents on several cryptocurrency exchanges. It lost its 1:1 ratio with the US dollar and at the time of writing, it was trading at $0.978161, with no signs of recovery. Investors are now questioning the health of the “overcollateralized stablecoin” and whether it can weather this storm.
Notably, USDD accounts for 81.25% of the decentralized finance protocol, Curve. Therefore, the liquidity pool of the stablecoin is highly imbalanced. It shows investors attempting to pull out their holdings after the de-pegging incident.
Crypto analyst “resdegen” started the question of whether Tron will have to sell its holdings of 14,000 BTC as almost 990 million of its USDC is stuck in JustLend. After accounting for deposits and liabilities, the network can only withdraw $660 million, they said. Responding to this, the founder of the Tron network, Justin Sun, said that the liquidity pool is functioning at a healthy rate. He also speculated that the imbalance was caused by Alameda selling its USDD holdings.
USDD Collateral Under Scrutiny
An on-chain crypto sleuth, “lookonchain”, also researched the USDD incident independently. It claimed that the stablecoin is not safe as its reserves have decreased by $548 million USDC. It also explained how Tron has been lying to its users.
9.
So the total assets available in the treasury are 139M $USDC and 14,040.6 $BTC ($225M).
A total of $364 M of assets.
But the total supply of $USDD is $725M.
The Collat. Ratio is only 50%! pic.twitter.com/vMX52amIPe
— Lookonchain (@lookonchain) November 14, 2022
It took to Twitter to break down that even after de-pegging, USDD had $990 million in its reserves. Sun utilized 550 million USDC from the reserve to send to 3 addresses. After that, only $442 million USDC was left, meaning $548 million worth of USDC had disappeared without any account. It also revealed that USDD is backed by assets that are only 50% of its value, as opposed to its previous claim that the stablecoin is backed by a 130% collateral ratio.
Even today, USDD’s team tweeted that the algorithmic stablecoin’s price stability is maintained through monetary policies adopted by the TronDAO Reserve “based on market conditions.”
“USDD enjoys a guaranteed collateral ratio of at least 130%. The collateral ratio of #USDD is over 200% now,” it added. It also provided a screenshot of TronDAO’s current reserve holdings, which had a market value “close to $1.47 billion.”
At #USDD transparency is key.
Our Collateral Ratio is over 200%, with a total market value of close to $1.47 billion, twice the value of the 725M USDD in circulation. ✅
You can check our collateral assets at all times on https://t.co/j4gKIstpqJ and https://t.co/v9DTFXM7IW 💪🏼 pic.twitter.com/8xDIlI4Sr8
— USDD (@usddio) November 14, 2022
Tron Faces Bleak Future
Nevertheless, both USDD and Tron’s native token TRX are facing a downward slope in trading markets. TRX slipped 20.8% in the past week, facing an over 5% dip earlier today. This has raised concerns that the Tron ecosystem could meet the fate suffered by the Terra network earlier this year when its governance token Luna and algorithmic stablecoin UST were obliterated from the market.
At the same time, FTX’s downfall is causing huge turmoil in the crypto industry and might continue to do so. If Tron has to sell its Bitcoin holdings as users are speculating, it may drag down the asset’s value even more. Also, findings by Lookonchain raise suspicion about the founder withholding information from users. Therefore, investors worry that the TRON network will follow a downward path leading to another debacle in the industry.
