Justin Sun’s USDD Stablecoin Drama: Here’s What’s Happening With $1.7 Billion Asset

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As a seasoned crypto investor with over a decade of experience navigating the ever-evolving digital asset landscape, I can’t help but feel a sense of unease when it comes to recent developments involving Justin Sun’s USDD stablecoin. The news about the liquidity thinning, particularly concerning the 12,000 BTC that were held in reserve for USDD and their sudden move to HTX, is a cause for concern.

The most recent news concerning Justin Sun’s USDD stablecoin has the cryptocurrency community somewhat worried as liquidity on the Tron’s stablecoin might get much thinner. Approximately 12,000 BTC that were held in reserve for USDD were recently moved to HTX, formerly known as Huobi.

nearly all the collateral (98.8%) supporting this stablecoin is backed by approximately 10.93 million TRX, which equates to around $1.703 billion. This means that most of the value backing USDD comes from this single cryptocurrency, TRX.

As reported by Tron DAO Reserve, approximately 12,000 Bitcoin previously held as reserves for USDD have been transferred to HTX recently. The current circulation of USDD stands at around 745 million units, with a total collateral value amounting to about $1.723 billion. However, it’s important to note that nearly all of this USDD (98.8%) is backed by approximately 10.93 million TRX, equivalent to a value of $1.703 billion.— Wu Blockchain (@WuBlockchain) August 23, 2024

Despite TRX being a significant asset, its extreme price swings pose a significant challenge. Essentially, what’s concerning is that the foundation of a stablecoin, which is supposed to maintain stability, is now based on something whose worth can vary greatly.

Intense selling activity on USDD might cause a shortage of available funds, making it difficult for the stablecoin to keep its value consistent with the dollar due to the unpredictable nature of the asset backing it.

In response to community concerns, Justin Sun stated that any holder of collateral has the freedom to withdraw any desired amount without needing approval, as long as their collateral surpasses the system-specified threshold. However, it’s worth noting that despite USDD’s long-term collateralization rate being over 300%, its capital utilization efficiency could be improved.

Switching from Bitcoin (BTC) reserves to Trustcoin (TRX) might appear as a daring decision, despite Sun’s comments suggesting a robust collateralization ratio for the system.

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2024-08-23 13:08