TRON Price Gains 24% But USDD Hanging By a Thread

The cryptocurrency market has sharply declined since the beginning of the week. While the market is showing signs of a recovery, the losses are still being felt, with projects such as the USDD stablecoin witnessing a notable decline from its $1 peg.

Despite USDD being far below its peg, TRON’s native token, TRX, has gained significantly during the past 24 hours. The gains stem from the effort taken by the TRON DAO Reserve to maintain the USDD peg.

TRON DAO Reserve buys TRX to save USDD peg

The founder of TRON, Justin Sun, seems committed to ensuring that the USDD stablecoin does not suffer the same fate as the collapsed Terra UST stablecoin. Sun has vowed that the USDD stablecoin peg will be restored, and this seems to be working in raising the value of TRX.

The TRON DAO Reserve allocated $220 million on Wednesday to buy TRX tokens on Binance. Sun still has another $280 million that could also go towards defending the peg.

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The USDD algorithmic stablecoin shares some similarities with the collapsed Terra UST. The stablecoin is currently targeted by short sellers that have plunged its value to trade at around $0.97. The USDD depeg is caused by a market-wide selloff, and with TRX declining in prices, USDD has also been affected.

On Wednesday, the TRON DAO Reserve allocated $100 million worth of the USDC stablecoin to the Binance exchange. The funds went towards buying TRX. After a few hours, the foundation deployed another $120 million to support TRX’s uptrend.

The Reserve has been given another $500 million to defend the peg. The Reserve is also doing more than just buying TRX. It had earlier announced withdrawing 2.5 billion TRX from Binance to protect the entire blockchain industry and the cryptocurrency market. These efforts have helped save TRX’s value but have done little to sustain the USDD peg.

USDD has still depegged

The USDD stablecoin has still depegged from the $1 value despite the efforts made by Sun and the TRON DAO Reserve to maintain the peg. At the time of writing, the stablecoin was trading at a 4% discount at $0.96.

Sun has previously said that USDD is a different stablecoin from the crashed Terra UST token. UST crashed in early May after the Luna Foundation Guard failed to sustain the peg. However, the DAO Reserve has insisted that USDD is over collateralized, lowering its risk of depegging. The collateralization ratio for USDD currently stands at 314%.

The efforts to save the USDD peg could not be working according to the plans of the DAO Reserve because of the turmoil across the market. With most coins losing value, selling pressure is piling up on TRX and USDD.

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