Market Meditations | June 14, 2022

  • Last month, Terra’s UST de-pegged, and LUNA crashed to zero, wiping $18 billion off the crypto market.
  • While the failure was partly due to macro-economic concerns around the stock and crypto markets, it highlighted the fragility of algorithmic stablecoins.
  • Earlier today Tron’s stablecoin USDD dipped to 0.97, raising fears that a similar death spiral may play out.
  • The coin was only launched at the start of May and has dropped below parity before but this is the first time it has remained off-peg for more than 24 hours.
  • The founder of Tron, Justin Sun, tweeted that their reserve was going to deploy $2 billion in order to shore up the price and create a short squeeze.
  • This hasn’t stopped the native token of Tron from taking a double-digit hit in price as well, with TRX currently sitting at about $0.06.

Tron reported that USDD was over-collateralised by a ratio of up to 1.3, by purchasing a basket of assets including BTC, TRX, and other stablecoins. However, not everyone agrees, such as @resdegen from ProximityFi, who claimed in a tweet thread that it was only 92% collateralised.