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Trouble Ahead for Justin? USDD falls to $0.97 - uh oh!

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@kevinnag58
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Exacerbated by the Terra/UST collapse, fear and downside speculation has shifted to another stablecoin exhibiting signs of distress.

Stablecoin protocol USDD’s price dipped to $0.97 on major crypto trading platforms on Monday. Because of this, the market started to keep an eye on the project with fears that the project will follow the footsteps of Terra (LUNA), now officially Luna Classic (LUNC).

Reguerra, E. USDD stablecoin falls to $0.97, DAO inserts $700M to defend the peg. (Accessed June 13,2022)].

In fact, a bot designed to monitor large asset transfers reported:

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Additionally, Nassen, a blockchain analytics protocol, "has also detected that one of the funds that capitalized on the UST depeg has started actively transferring larger amounts of USDD and other stablecoins" [Id], tweeting:

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As it appears that "the main problem that led to the fall of Terra was that the reserves appeared to be overcollateralized, but in reality, they weren’t" [Bar-Geffen, S. What can other algorithmic stablecoins learn from Terra’s crash?. (Accessed June 13, 2022)] attention should turn to the collateralization of USDD.

In this regard, cryptocurrency researcher Resdegen reports that:

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Responding to the existing adverse market conditions, the Tron DAO Reserve has announced:

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So now the question becomes 'can Justin be trusted or will he pull a Do Kwon here'? And is this action enough to save USDD (and more importantly, its investors)?

"In May, the USDT-dollar peg also showed signs of wobbling, as the stablecoin traded below $0.99 on some exchanges. However, Paulo Ardoino, the chief technology officer of Tether, assured users that, unlike other stablecoins, the project holds a "strong, conservative and liquid portfolio," explaining that they are capable of maintaining USDT's dollar peg" [Reguerra. Supra. See, also Jenkinsen, G USDT-dollar peg wobbles as markets continue to struggle: Tether CTO weighs-in. (Accessed June 13, 2022)]. This demonstrates that a properly collateralized stablecoin can survive in today's market.

But even 100% is not enough when your collateral is as volatile as a cryptocurrency. A good collateral ratio could be between 400% and 800%.... And smart contracts should rigorously enforce this, prohibiting new coins from being minted if the collateralization is not ideal.

[Bar-Geffen. Supra].

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