TRON DAO Reserve Withdraws 2.5 Billion TRX From Binance to Safeguard USDD Peg

The last thing Justin Sun – founder of TRON – would like to see is the UST-Terra fiasco being repeated again on his stablecoin project USDD. The confident founder, who had vowed the lost peg of the stablecoin would be soon recovered, injected $220 million on Wednesday to purchase TRX on Binance.

According to the announcement on Tuesday, he had at least another $280 million available for defending the peg.

• Following Terra’s debacle, Justin Sun’s algorithmic stablecoin USDD has been the new target by short-sellers.
• As market selloffs deepened, TRX – one of the predominant crypto assets that back USDD as collateral – has been down over 30% in the past seven days, causing its sister stablecoin to lose peg, as reported by CryptoPotato on Tuesday.
• In order to maintain that dollar parity, the DAO Reserve – the foundation behind the stablecoin – deployed $100 million USDC to Binance to purchase TRX on Wednesday. Only hours later, the foundation injected another $120 million to prop up its price.
• The Reserve revealed earlier that it had received another $500 million to defend the USDD peg.
• Besides actively purchasing such an asset, the Reserve announced the withdrawal of 2.5 billion TRX from the exchange to “safeguard the overall blockchain industry and crypto market.”
• The idea behind such a strategy is to reduce the circulating supply of TRX in the exchange, so short-sellers have to pay a higher fee for shorting the asset. As sellers run out of bullets, resulting in the decline of selling pressure, the asset’s price could, theoretically, go up again.
• Fully supporting the mass withdrawal as a way of fighting the short sellers, Sun tweeted:

#TRX funding rates for perpetual swaps max -778% a year on binance. pic.twitter.com/9DFOnFxXXT

— H.E. Justin Sun (@justinsuntron) June 15, 2022

• Though the founder announced a $2 billion deployment on Monday to fight against short sellers, the stablecoin still failed to reclaim its peg in the past two days. After a series of measures, USDD is trading slightly above $0.97.
• According to the official website, the collateralization ratio of USDD, which aims to demonstrate how secure the stablecoin is, is sitting at 314%.