Tron's Stablecoin Loses Its Peg to the Dollar. Is It the Next LUNA?

Is recovery feasible, or will this coin repeat LUNA's history?

USDD, the stablecoin of the Tron ecosystem, has lost its peg to the U.S. dollar, causing many investors to fear the worst. The coin has somewhat recovered from its fall to a value of $0.97, but many investors are still concerned. The leadership of the Tron DAO continues to expend resources in an effort to avoid the same fate as LUNA experienced only a month ago. Will USDD rise back to the surface, or drown in the waters?

The fall of LUNA

USDD has many similarities to another digital currency that made headlines last month, LUNA. As a stablecoin, these tokens seek to hold steady at a value that is equal to that of the U.S. dollar. Last month, LUNA saw a drop in price similar to USDD, quickly recovering, only to fall to unrecoverable lows. Many are worried that history is repeating itself with USDD, forecasting the coin's recovery as short-lived. These projections may be correct, as USDD currently sits at a value of barely over $0.98. The Tron DAO is making moves to help ensure the stablecoin will be backed with enough collateral to avoid becoming the next LUNA.

Tron's purchases

In an effort to bail USDD out, the Tron DAO has reportedly purchased over 900 million USDC, adding 650 million of it to the reserve as collateral for USDD. The DAO's plan is to make USDD overcollateralized in order to make investors more confident in the stablecoin. With the DAO also putting $2 billion toward an effort to prevent TRX shorting, the network seems to be fighting on two financial fronts. If its strategy pays off, the Tron DAO will have proved itself to be more capable of survival than Terra was before it. If Tron does not see shorting come to a halt, and USDD continues to fall, the Tron blockchain may be in for a bumpy ride.

The bottom line

USDD has lost its peg to the U.S. dollar, and many are concerned this could be the beginning of the end for the stablecoin. With USDD showing many of the signs that LUNA did before its own collapse, investors are worried for the fate of this type of cryptocurrency. The Tron DAO's leadership has not called it quits on USDD, however, and is making large investments to boost the coin's collateral. The coin does not need to make up much ground to recover its peg, but with so many factors fighting against it, USDD has the potential to fall as far as LUNA did. Only time will tell whether history will repeat itself, or if USDD is made of stronger stuff than LUNA.

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