TRON DAO Reserve Withdraws 2.5 Billion TRX From Binance to Safeguard USDD Peg
TRON DAO Reserve is set to withdraw 2.5 billion TRX out of Binance, making it more difficult for short sellers to short the asset.
TRON DAO Reserve Withdraws 2.5 Billion TRX From Binance to Safeguard USDD Peg
The last thing Justin Sun - founder of TRON - would like to see is the UST-Terra fiasco being repeated again on his stablecoin project USDD. The confident founder, who had vowed the lost peg of the stablecoin would be soon recovered, injected $220 million on Wednesday to purchase TRX on Binance.
According to the announcement on Tuesday, he had at least another $280 million available for defending the peg.
Following Terra's debacle, Justin Sun's algorithmic stablecoin USDD has been the new target by short-sellers.
As market selloffs deepened, TRX - one of the predominant crypto assets that back USDD as collateral - has been down over 30% in the past seven days, causing its sister stablecoin to lose peg, as reported by CryptoPotato on Tuesday.
In order to maintain that dollar parity, the DAO Reserve - the foundation behind the stablecoin - deployed $100 million USDC to Binance to purchase TRX on Wednesday. Only hours later, the foundation injected another $120 million to prop up its price.
The Reserve revealed earlier that it had received another $500 million to defend the USDD peg.
Besides actively purchasing such an asset, the Reserve announced the withdrawal of 2.5 billion TRX from the exchange to 'safeguard the overall blockchain industry and crypto market.'
The idea behind such a strategy is to reduce the circulating supply of TRX in the exchange, so short-sellers have to pay a higher fee for shorting the asset. As sellers run out of bullets, resulting in the decline of selling pressure, the asset's price could, theoretically, go up again.
Fully supporting the mass withdrawal as a way of fighting the short sellers, Sun tweeted:
#TRX funding rates for perpetual swaps max -778% a year on binance. pic.twitter.com/9DFOnFxXXT
— H.E. Justin Sun (@justinsuntron) June 15, 2022
Though the founder announced a $2 billion deployment on Monday to fight against short sellers, the stablecoin still failed to reclaim its peg in the past two days. After a series of measures, USDD is trading slightly above $0.97.
According to the official website, the collateralization ratio of USDD, which aims to demonstrate how secure the stablecoin is, is sitting at 314%.
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