The TRON DAO Reserve has announced plans to withdraw 2.5 billion TRX from the Binance cryptocurrency exchange. The withdrawal has been done to maintain TRX’s value and make it hard for sellers to short the asset.
Justin Sun, the co-founder of the TRON blockchain, unveiled the USDD algorithmic stablecoin just a few days before Terra UST crashed. Sun’s recent actions to buy back TRX is a way to prevent USDD from suffering the same fate as UST.
TRON DAO Reserve’s efforts to save the USDD peg
USDD started depegging after being targeted by short-sellers. The recent selloffs across the market have affected the value of TRX, an asset that backs the USDD peg. The token has dropped by more than 30% over the past week, causing USDD to lose its peg.
Sun has said the USDD peg will be restored despite the ongoing turmoil. On Wednesday, the TRON co-founder injected $220 million into Binance to buy TRX and save the peg.
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To maintain the dollar parity, the TRON DAO Reserve, which is the foundation that supports the USDD stablecoin, allocated $100 million worth of USDC to Binance to buy TRX. After a few hours, the foundation allocated another $120M to boost TRX’s price.
The Reserve has already received $500 million to save the USDD peg. It added that the exchange would withdraw 2.5 billion TRX tokens from the exchange to protect the entire cryptocurrency market and the blockchain sector.
The TRON DAO Reserve is using this strategy to lower the circulating supply of the TRX token on exchanges to prevent short sellers from shorting the asset. Once the selling pressure declines, TRX’s price could resume the uptrend.
USDD has still depegged
The plans made by the TRON DAO reserve are not working, given the recession across the cryptocurrency market. The entire market has been down during the past few days, and this is undermining TRON’s plans to save the peg.
Sun announced a $2 billion deployment to save the peg on Monday. However, the stablecoin is still far from reclaiming the $1 value over the past few days. At the time of writing, USDD was trading at $0.965, showing that it is still dropping below the peg.
The company’s official website claims that USDD has a collateralization ratio of 314%. The ration shows that the stablecoin is secure, and the blockchain has the potential to maintain the peg.
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