Tron DAO Reserve to Deploy Another USDC 500M to Protect Stablecoin as Depeg Extends

cryptonews.com:

The Tron DAO Reserve (TDR), the entity in charge of managing Tron-based stablecoins, aims to deploy another USD 500m worth of the stablecoin USD coin (USDC) to defend the peg of its algorithmic stablecoin USDD.

The move comes as USDD, despite being overcollateralized, has plunged to USD 0.96, further distancing from its intended peg of USD 1. At 8:24 UTC on Wednesday, the stablecoin has dropped by 2% over the past 24 hours and 3.8% over the past 7 days, according to CoinGecko.

"For the current market extreme condition, Tron DAO Reserve has received another 500 million USDC to defend USDD peg," TDR's official Twitter account said, claiming that the stablecoin is now overcollateralized by 310%.

The new injection to support the USDD peg comes shortly after the Tron DAO deployed USDC 700m earlier this week. The entity has also allocated another 2 billion to guard against short positions against Tron's native coin TRX.

Tron founder Justin Sun announced USDD in an open letter back in April and claimed that it would be “a fully decentralized stablecoin underpinned by mathematics and algorithms.”

Notably, USDD is similar to Terra’s now-failed stablecoin UST in many ways. For one, both so-called stablecoins use a mint-and-burn mechanism, with users being able to burn TRX to get the equivalent amount of USDD. Sun argued that this would enable arbitrageurs to exploit price inconsistencies while keeping the stablecoin near its peg.

“When USDD’s price is lower than 1 USD, users and arbitrageurs can send 1 USDD to the system and receive 1 USD worth of TRX. When USDD’s price is higher than 1 USD, users and arbitrageurs can send 1 USD worth of TRX to the decentralized system and receive 1 USDD,” he said in the open letter.

Another notable