TRON founder Justin Sun has announced infusing more capital as the stablecoin project USDD is spiraling out of control. The tweet also came with a link showing a wallet addressed to him that transferred nearly $1 million worth of TUSD.
Sun also asserted that USDD is 200% overly collateralized by numerous popular digital assets.
The price of the TRON USDD algorithmic stablecoin has dropped to $0.97, losing even more of its dollar parity. This could potentially put unwanted stress on USDD-paired DeFi pools on Curve.
Currently, USDD consists of over 80% of the USDD/3CRV pool reserves under Curve Pool DeFi protocol, down from a previous figure of 86%. The depeg would have a negative impact on swapping other DeFi assets like DAI or USDC in exchange for USDD.
The token’s prolonged depeg has cast doubts over the project’s sustainability. Some even wondered whether the dollar-pegged asset would go down like Terra’s stablecoin UST.
Last month, the crypto community speculated that USDD might be unsafe to hold with regard to certain unusual activities around the Tron stablecoin.
When USDD lost its $1 peg then, Twitter user Lookonchain on Nov 14 alleged that $548 million of the $990 million in the USDD’s reserve disappeared.
TRON Stablecoin Project Is Doomed like UST?
The tweet was accompanied by transaction trails showing that the USDD founder, Justin Sun, transferred $550 million from the stablecoin reserve to three different addresses for loan repayment.
1/ $USDD is not safe!#USDD has been depegged since Nov 9 and has not returned to the peg!#USDD reserves decreased by 548M $USDCJustin Sun used the 350M $USDC in the reserve to repay the loan in #Justlend.The real Collat. Ratio is only 50%!Here is some evidence.
— Lookonchain (@lookonchain) November 14, 2022
However, drilling deeper, the online sleuth alleged that almost 99% of the TRX tokens in the USDD reserve were unavailable. The implication is that the collateral ratio of the USDD stablecoin reserve is only 50%.
Furthermore, blockchain data showed that the USDD founder withdrew $170 million of a stablecoin token from Binance to the USDC issuer, Circle.
The UST algorithmic stablecoin reportedly lost its peg eight months ago as a result of some malicious actors drastically skewing the liquidity pool that includes the coin and three others.
Later, LUNA, a sibling token of UST, would experience a six-week decline from its all-time high price of $119.18 to $0.00001675.