The move was noted by the ‘Lookonchain’ Twitter feed which reported a breakout at $0.978 on Nov. 10. He noted that the USDD pool vs. USDC/USDT/DAI was unbalanced, with USDD accounting for 82.27%.
On November 8, a whale exchanged 4.49 million USD for 4.46 million USDT with a ratio of 0.9935, he pointed. That’s when the stablecoin started to drop.
Also, on November 9, another whale address exchanged 6.65 million USD for 6.52 million USDCwith a ratio of 0.9799.
It also reported that the TRON stablecoin has a collateral ratio of 283%. The supply is $725 million and the collateral is $2.05 billion, according to the official website.
Reportedly, Lookonchain checked collateral details to find that over 99% of TRON’s TRX was “unavailable”. Additionally, all of the USDC was deposited into Justin Sun’s decentralized lending platform, Justlend.
This has been borrowed, leaving only 596 million USDC. Adding this to the 14,040 Bitcoin collateral gives a ratio of just 114% at current market prices. The stablecoin is getting dangerously close to being out of collateral. USDD lost its peg in June, falling to $0.98, as reported by BeInCrypto.
What is USDD
USDD is the algorithmic stablecoin of the TRON blockchain, launched in May 2022. At that time, Justin Sun explained how it works.
In theory, when the price of USDD is lower than 1 USD, users can send 1 USDD to the system. They will receive 1 USD worth of TRX in return. However, when the price of USDD is higher than $1, users can send $1 worth of TRX to the system and receive $1 back.
These algorithmic stablecoins become unstable when markets are very volatile and prices plummet (as they have been this week).
Luckily, USDD doesn’t have as many users compared to tERRA’s UST, so a potential collapse is unlikely to cause the same damage. The daily volume of the stablecoin is $150 million, according to CoinGecko. By comparison, USDC has $10 billion in daily trading volume.
Another stablecoin loses its peg
But USDD is not the only stablecoin that is falling in recent hours. Tether (USDT), the largest currency in the entire crypto market, lost parity with the dollar. In the previous trading session, the price of USDT started to slide gently and in the meantime, USDT has already touched $0.97 on some exchanges, which represents a drop of almost 3%. Meanwhile, the price of USDT has risen again.
Typically, the value of USDT and all other stablecoins is pegged to an underlying coin. In the case of USDT, that is the US dollar and ideally USDT is worth exactly $1. That is no longer the case.
Alameda Research, the company of FTX CEO Sam Bankman-Fried (SBF), where the whole problem seems to have started, is rumored to have borrowed $250,000 on the Aave platform. There is now speculation that this means SBF USDT’s Alameda is shorting. In any case, many things are still unclear at the moment and unsubstantiated rumors are popping up everywhere.
Source: Ambito
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