Self-proclaimed Internet detective, Cofeezilla has said that Justin Sun’s new algorithmically-driven stablecoin, USDD, is towing the path of becoming the next LUNA/UST.
In a Twitter thread and YouTube video, he said that the USDD stablecoin currently has a Market Cap of $723 million. He pointed out that it’s not actually algorithmic or decentralized as advertised.
I investigated Justin Sun’s new stablecoin USDD, which is trying to be the next #LUNA and already has a $723M market cap.
Here’s what I found out🧵
(NEW VIDEO IS ON YOUTUBE)
— Coffeezilla (@coffeebreak_YT) June 24, 2022
Like the LUNA/UST double tokens, users must burn Tron TRX to mint USDD. The difference here is that only white-listed institutions can mint the USDD. The mint/burn function has been turned off, so it’s impossible to burn any TRX for USDD.
This is a good thing since there’s no arbitrage mechanism that could cause an algorithm death spiral. But it also means the absence of such a mechanism makes this stablecoin unstable as well.
Cofeezilla also touched on the Tron DAO, which holds over $2 billion in Bitcoin and other assets as collateral for its USDD. According to him, there’s no assurance that this will be deployed if anything goes wrong with USDD’s pegging.
The BTC wallet may have existed for more than two years. This would indicate it’s not a new DAO wallet and could belong to Justin Sun, the founder of Tron Foundation.
Using on-chain data analysis, Coffeezilla found that Sun minted 94% of USDD in circulation, showing it’s not a truly decentralized currency.
If it turns out that all of the collateral is owned by Sun personally, and he has been responsible for most minting, then there’s a significant risk to those holding this currency.
As he puts it,
“USDD looks like a honeypot for retail traders to get dumped on by Justin Sun himself.”
The stablecoin continues to perform below peg and currently trades at $0.97, which is not even close enough for comfort!
The Tron DAO and Justin Sun have worked tirelessly to help the coin regain its lost peg, but so far, without success.
Tron injected another $500 million USDC into its reserves to save USDD. Both this investment and the measures announced came after the flagship stablecoin of the TRON ecosystem, USDD, lost its parity with the dollar and reached lows close to $0.91 on exchanges such as KuCoin.
Keep in mind that the founder of TRON, Justin Sun, and the TronDAO team announced some plans to rescue USDD in the context of the low it registered at a particular time. In addition to the previously announced capital injections, those responsible for the project stressed that they would take any necessary measure to prevent the stablecoin from being affected by the general fall that its weight was feeling on the market.
However, the shocks of the crypto market in these difficult times are still shaking USDD, which according to data published by CoinMarketCap, is trading at about $0.98 per unit, although it reached lows close to $0.976 around 5:00 am (New York time) on June 14.
Let’s keep in mind that there is special tension on algorithmic stablecoin projects at the moment, so USDD is in the sights of many critics and analysts after what happened with Terra’s UST. The UST currency, whose collapse led to the fall of its own Blockchain ecosystem, generated significant losses among its owners and dragged in a domino effect that affected a good part of the leading cryptocurrencies in the market.