USDD Stablecoin Loses Its Peg As Crypto Market Rout Continues

The week began on a wrong footing for the crypto market as the market’s bleeding continued after a brief stop. Due to the extreme market situation, withdrawals for some tokens were halted, as reported by the Celsius Network.

Stablecoins Plunges Again

The crypto market hasn’t recovered following the collapse of the Terra network and the de-pegging of the UST stablecoin. This led to differences in the value of stablecoins pegged to the dollar and Bitcoin itself.

Now, the USDD stablecoin is bearing the brunt of wild crypto volatility. As expected, the market is red and has disrupted the otherwise stable ecosystem of stablecoins.

Moreover, the current de-pegging of the stablecoins has sent shock waves across the industry. However, Justin Sun, CEO of Tron, believes that the setback is slight as the USDD stablecoin can easily maintain its peg.

According to Sun, the incident arises from negative funding for the TRX tokens on the Binance platform. As such, this affects the stability of Tron’s algorithmic stablecoin, the USDD.

Meanwhile, the USDD has already shed 1.5% and currently trades at $0.9886.

Although USDD is relatively stable at the time of writing, it still stands the chance of plunging further if the right balance is not found.

Re-Pegging is on the Way

When stablecoins are pegged to the U.S. dollar, it ensures a 1:1 between the pairs, which helps maintain liquidity. Stablecoins, in turn, facilitate the liquidity of cryptocurrencies instead of the fiat currencies.

Justin Sun reiterates that the de-pegging is not something to be alarmed about as it is not an extreme incident. Meanwhile, Sun revealed that the situation would be addressed in time and would not be more than 24 hours. 

The Tron CEO further noted that the network would use $2 billion from the TronDAO reserve to address the setback. In the meantime, the team is working on facilitating the re-pegging of the USDD.

Furthermore, Sun provided more updates, revealing that $700 million has been deployed to support the USDD stablecoin. This proves to be the case because the coin appears to be on a recovery track as of press time.

Is Anything Wrong with Algorithmic Stablecoins?

Since the emergence of algorithmic stablecoins, the coin has been under the lens after the Terra UST meltdown. And Tron USDD is also an algorithmic coin.

After the Terra incident, stablecoins are under scrutiny from regulators and users alike. After all, stablecoins are known to be stable, unlike cryptocurrency tokens. 

However, the Tron network appears to be set for any uneventful incident like the present one. It has prepared for emergencies, as shown by the early response, it takes to deploy its reserves to contain the situation.

Unlike the USDD, Terra’s UST was not in any way ready for uncertainties in the market.

The eventual meltdown of the Terra ecosystem signals a painful period for the crypto industry. Despite some noticeable efforts toward reviving the network, some believe this may be the end o the Terra ecosystem.