Worries mount of another Terra debacle
The algorithmic stablecoin known as Decentralized USD or USDD slipped a bit from it’s peg on Tuesday, this has happened while there is continued stress in the crypto market.
The USDD slipped to a $0.974 valuation before recovering to $0.979 by the end of Tuesday. This comes even after the TronDAO injected $700 million worth of USDC or USD coin, which is centralized and issued by Circle, in order to defend the peg.
TronDAO has stated there is a 300% collateral ratio backing the value of the token. This translates to the DAO having a necessity of holding $2.1 billion in assets of BTC and Tron plus USDC and USDT.
This slip is not a simple issue as many are afraid of another calamity such as the fall of TerraUSD which was the token that inspired USDD. The collapse of TerraUSD created a vacuum that wiped more than $40bn from investors and caused various companies to go bankrupt.
The model of USDD is the same as TerraUSD which includes mint and burn , meaning that when the price is below a dollar you can burn the token to get a full $1 dollar value of Tron, the native token of the Tron blockchain and vice versa. USDD also pays 18% to stake the stablecoin.
All of this looks a bit too close to a token that has failed before and many investors are a bit wary of what this may mean for the future of the stablecoin or anyone involved in that ecosystem.