So you remember when Terra fiasco happened and Luna/UST was losing its value rapidly, then the attention seeking billionaire came up like a crypto messiah to seize the opportunity and announce that it will be creating its own StableCoin called USDD and it will have higher APR. what a time to come up with an idea? I have a always known him on Twitter to be the man that seems to have solution to everything.
USDD was launched, I think it had 30% APR, I guess to entice more people into investing in it. Some did, while some were wise enough not to, because lots of people don’t trust him. USDD is an algorithmically backed StableCoin that is backed by Bitcoin, TRX. Almost following the same step that Terra did, it’s like he just don’t learn. He promised that this StableCoin will be super decentralized hence the meaning of the last D in USDD. That is USDDecentralized, well, is it really?
Fear Of Algorithmically Backed StableCoins
Thanks to Terra, lots of people are becoming conscious and scared of investing in them. This is because, they involved the backing by a base crypto currency, in the USDD case it’s the TRX, you mint USDD by burning TRX and Burn USDD to mint TRX. How is this different from Terra’s plan that failed? TRX is an unstable volatile coin that is limited to the volatility of the market, USDD is also backed by Bitcoin, which is another coin that is unstable and limited to volatility.
When the value of USDD is going less than $1, the smart contract is supposed to burn USDD to mint TRX which is then sold in the open market to buy USDD to increase the demand and increase the price so as to stabilize the price at $1. But such thing is usually always difficult during the bear market because the value of TRX is also decreasing due to the volatility of the market. So what happens when investors keep losing trust and keep selling their USDD? It means that we might likely see a repetition of LUNA/UST all over again.
Still Under $1 Peg After 1 Week
Last Week we saw the price of USDD go down $1, I think it went down up to $0.94 or $0.93, for a StableCoin that promised it’s users and investors stability, it seems to be deviating from its job which is maintain $1 Peg. The so called Decentralized organization, TRONDAO, has deployed some money to help the peg come back to $1. It did at some point but still went down below $1. The team has been working tirelessly to make sure the value reaches the $1 price peg again, but unfortunately it’s still below $1.
If you ask me, it’s just Déjà vu of LUNA/UST, which is no different from what USDD is. The market cap of USDD is $694 Million and a total supply of 723 Million, and the market cap of TRX is $5.6 Billion. This was just how the value of LUNA/UST got wiped out few weeks ago when it couldn’t hold its peg, are we going to see the same thing happen with USDD and it might affect TRX?
Although the USDD is said to be over Collateralized meaning that there are more than enough fund to help make sure the price of 1 USDD is peg to $1. But it’s a week since the depeg of $1 and it’s yet to be stable, what does this say about the future of USDD?