TRON-Based USDD Stablecoin on Shaky Ground as It Depegs to $0.97

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The fallout from this week’s crypto contagion continues to send shockwaves across the industry. The latest digital asset on thin ice is the TRON-based USDD stablecoin.

Justin Sun’s stablecoin, USDD, has dropped its dollar peg. Around an hour or so ago, USDD fell to $0.970, according to CoinGecko.

The move was observed by the ‘Lookonchain’ Twitter feed which reported a de-pegging to $0.978 on Nov. 10.

It noted that the USDD vs. USDC/USDT/DAI pool was out of balance, with USDD accounting for 82.27%.

USDD on Shaky Ground

On Nov. 8, a whale exchanged 4.49 million USDD for 4.46 million USDT with a ratio of 0.9935, it noted. This is when the stablecoin started to drop its peg.

Furthermore, on Nov. 9, a different whale address exchanged 6.65 million USDD for 6.52 million USDC, with 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.

Lookonchain reportedly checked the collateral details to find that more than 99% of Tron’s TRX was “unavailable.” Furthermore, all of the USDC was deposited in Justin Sun’s decentralized lending platform Justlend.

This has been lent out, leaving just 596 million USDC. Adding this to the 14,040 BTC of collateral gives a ratio of just 114% at current market prices. The stablecoin is getting dangerously close to being undercollateralized. USDD depegged in June, falling to $0.98, as reported by BeInCrypto.

USDD is the TRON blockchain’s algorithmic stablecoin, launched in May 2022. At the time, Justin Sun explained how it works. In theory, when USDD’s price 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 USDD’s price is higher than $1, users can send a dollar’s worth of TRX to the system and receive 1 USDD back.

These algorithmic stablecoins become unstable when markets are highly volatile, and prices are crashing (as they have been this week).

Fortunately, Tron’s stablecoin does not have that many users compared to Terra’s UST, so a potential collapse is unlikely to cause the same damage. The daily volume for the stablecoin is $150 million, according to CoinGecko. By comparison, USDC has $10 billion in daily trade volume.

Stablecoin Market Share Jumps

The collapse of cryptocurrency prices this week has increased the overall market share of stablecoins. Stablecoins account for $147.5 billion in combined total market capitalization.

With the crypto market cap tanking to $870 billion, their market share is now a record 17%. USDD has just a 0.5% market share of all stablecoins currently circulating.

Tether’s USDT is still the dominant one with a 47% market share, and Circle’s USDC is second with 29%. Both stablecoins have seen supplies shrinking this year.

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