tron trx dao reserves

The price of the Tron TRX token has surged 38% off its 15 June lows while it is also rising 6.3% in the past 24 hours as the market appears to be getting optimistic about an upcoming fix to the depegging of the project’s flagship stablecoin USDD.

As of this morning, the value of USDD is still standing below $1 but has continued to shorten the distance with this intended peg in the past few days.

The overall turmoil that the crypto market has been experiencing lately has undermined the public’s confidence in algorithmic stablecoins such as USDD despite the project claiming to be overcollateralized.

According to the official website of the Tron DAO Reserve, the total supply of USDD currently stands at $723.32 million while the project’s collateral is sitting at $2.32 billion in the form of 10.87 billion TRX tokens, 14,040 BTC tokens, 140.01 million USDT tokens, and 1.03 billion USDC tokens. This results in a collateral ratio of 321.4%.

The collateral can be easily audited by checking on the wallets that contain the tokens mentioned above.

Users can currently stake USDD and USDT stablecoins in exchange for a 35.8% annual percentage yield (APY) – one of the most attractive offerings in the market since the implosion of Terra’s Anchor Protocol.

Your capital is at risk.

What is USDD and Why Has It Depegged?

The USDD stablecoin was officially presented to the world on 21 April by the founder of the Tron Network – Justin Sun.

Alongside the launch of the token, Sun announced the creation of the Tron DAO Reserve, an entity in charge of maintaining the price of USDD pegged to $1.

Same as with Terra’s demised LUNA and UST tokens, USDD should supposedly maintain its peg via mint and burn mechanisms with TRX. In this case, arbitrageurs are always allowed to exchange 1 USDD for $1 worth of TRX. This should reduce the available supply of USDD at any given point to push the price back to its intended peg.

However, after the collapse of LUNA, market participants have grown more and more skeptical about how capable these algorithms are to achieve their goal.

Even though UST was never as collateralized as USDD, the Luna Foundation Guard (LFG) back in May unsuccessfully deployed billions of dollars in an attempt to reclaim the peg.

It appears that the market may have taken notice that collateral might not be enough to withstand a full-blown attack against an algorithmic stablecoin, especially if the token that should supposedly be used to maintain the peg sees its supply grow exponentially until it becomes worthless – exactly what happened to LUNA.

For now, it appears that USDD has passed the test if its overcollateralization proves to be the ultimate solution to keep the token pegged to the North American currency.

A Closer Look at The Latest Price Action for Tron TRX

tron trx price chart

TRX/USD price chart (Binance) – Source: TradingView

The latest bounce off the $0.046 level has led to the formation of a bullish double-bottom pattern that could favor a positive short-term outlook for Tron (TRX).

Double-bottoms are considered bullish as they confirm that strong buying interest exists at the level they occur. Currently, the most relevant resistance that Tron must overcome is the token’s 200-day simple moving average – which is currently standing at $0.07 per coin.

Momentum indicators are also turning positive as the Relative Strength Index (RSI) just moved above 50 (bullish) while the MACD has just crossed above the signal line with this move being accompanied by steadily increasing histogram readings.

Notably, Tron TRX has been one of the least affected cryptocurrencies during this latest winter as the price has only dropped by 9.6% since the year started compared to over 50% most tokens have lost during that same period.

The reason for this is that Tron has managed to attract investors to its ecosystem through the offering of these appealing APYs for staking USDD and USDT. According to data from DeFi Llama, the network’s total value locked (TVL) is currently standing at $4.2 billion. This makes it the third largest network by TVL only behind Ethereum (ETH) and BNB Chain (BNB).

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