Justin Sun Moves 12,000 BTC From USDD Reserves to HTX, Community Worries About Liquidity
- WBOYOriginal
- 2024-08-23 21:41:11232browse
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.
Justin Sun's USDD stablecoin has recently made headlines, sparking concerns within the cryptocurrency community regarding the potential depletion of liquidity for Tron's stablecoin.
According to the latest updates, approximately 12,000 BTC that were allocated to serve as reserves for USDD have been shifted to HTX, formerly known as Huobi.
To provide context, USDD is a stablecoin that aims to maintain a 1:1 peg with the U.S. dollar. However, these recent adjustments to its reserves have raised questions about its stability.
Currently, there is a total of around 745 million USDD in circulation, with a reported collateral value of $1.723 billion. While this may initially seem reassuring, a closer examination reveals a concerning detail: roughly 98.8% of this collateral is comprised of 10.93 million TRX, which amounts to approximately $1.703 billion.
As per the updates from Tron DAO Reserve, around 12,000 BTC that were allocated to serve as reserves for USDD have been shifted recently, and all of these reserves now flow into HTX.
Presently, there are around 745 million USDD in circulation, with a collateral value of $1.723 billion, but about 98.8% of it is backed by 10.93 million TRX ($1.703…
Although TRX is a valuable asset, its volatility poses a significant concern. This essentially indicates that the primary asset supporting a stablecoin, which is inherently meant to be stable, is now something that experiences drastic fluctuations in value.
Due to the volatility of the asset backing USDD, heavy selling pressure on the stablecoin could potentially lead to a liquidity crunch, rendering it unable to maintain its peg.
In response to community concerns, Justin Sun stated that any collateral holder can withdraw any amount freely without anyone's approval if their collateral exceeds the amount specified by the system. Considering that USDD's long-term collateralization rate is over 300%, its capital utilization is inefficient.
Despite Sun's statements highlighting the system's high collateralization rate, the removal of BTC reserves and reliance on TRX can be viewed as a risky strategy.
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