A series of unfortunate events are hitting the timeline back-to-back amid the crypto market crash as now the TRON blockchain’s recently launched algorithmic stablecoin USDD ultimately lost its dollar peg reminding us of the Terra UST collapse.
According to Tron founder Justin Sun the de-pegging happened as a result of a high number of short sellers attacking TRX, the network’s native token on Binance.
When traders who are betting on a drop are compelled to liquidate their positions by purchasing back the underlying token, this is known as a short squeeze. The funding rate for shorting TRX on Binance has reached 500%, Sun revealed.
Sun stated that the condition would be rectified soon and that the de-peg wouldn’t even last 24 hours.
He also indicated that Tron might deploy $2B to combat Binance short-term funding rates and fight a negative 500% APR to ease the USDD re-peg.
The Tron DAO Reserve has announced a slew of new regulations aimed at “To safeguard the overall blockchain industry and crypto market.”
This comprised two separate 100 million USDC transactions each, followed by a 650 million UDSC purchase, bringing the total USDC supply on TRON to $2.5 billion.
The situation is still looking worse as USDD is trading at a price of $0.9797 at the time of writing still unable to re-peg. Meanwhile the TRX token is trading at a price of $0.05777.
The situation does remind the community of when Terra Luna crashed down with its stablecoin UST which now ended up with Terra founder Do Kwon getting accused of profiting off $2.7 billion from LUNA and UST which he denied later on.
Also Read: What Are Algorithmic Stablecoins & What Can Go Wrong With Them?
