Why Justin Sun’s USDD Stablecoin Is Struggling To Maintain Its Dollar Peg

A stablecoin It is a cryptocurrency that is pegged to a certain fiat currency. It provides stability to crypto investors, facilitating transactions. USDD, a stablecoin created by Tron Blockchain founder Justin Sun, has been losing its peg to the US dollar.

According to Coingecko, USDD it is currently trading at $0.9805. Although USDD was designed to be pegged to the dollar like other stablecoins, its value fluctuated between $0.9806 and $0.9798 over the past week.

As this played out, Sun’s crypto exchange, Huobi Global, joined the ranks of cryptocurrency companies that started this year with job cuts.

Adding to the pressure is the fear, uncertainty and doubt surrounding the Huobi exchange itself. Recent social media Posts on the exchange show that Huobi has higher withdrawals than deposits, which strengthened fears of a possible withdrawal disruption.

USDD creator, Justin Sun. Image: Cover art/illustration via CryptoSlate

How does USDD Stablecoin work?

USDD is a algorithmic stablecoin which uses complex arithmetic to keep the price pegged to a dollar. According to Tron DAO blog post Regarding the inner workings of USDD, the system does not consider the stablecoin to be unpegged when it falls below or above $1.

Looking at the charts, the stablecoin is constantly testing its 3% headroom set by the system. Although USDD is not considered by the system itself to be unpegged, this consistency is worrisome as any further dips could cause more problems, or eventually lead to the fate that befell UST when it crashed.

with investors skeptical of USDD since its inception, Sun has not done anything so far. This is clearly due to the current situation at Huobi, leaving the reins to the system that governs the USDD.

The Huobi situation and what it means for USDD

Sunwho is an adviser to Huobi, has been said to be withdrawing over a billion dollars which further strengthened the FUD surrounding the exchange. Speculators, however, believe that the withdrawn funds would be used for Huobi’s operations.

This could be true, as the exchange could be burning through its liquidity as withdrawals continue to rise due to recent negative events. Any negative news about Huobi could have an effect on the USDD and USDJ peg.

Crypto total market cap at $807 billion on the daily chart | Chart: TradingView.com

Not to mention, both stablecoins are limited as to where they can be bought and sold. According to CoinCodex, USDD is tradable on 11 exchanges, while USDJ is tradable on three. Both can be traded on Huobi and Poloniex.

Sun being one of the shady characters in crypto, it remains to be seen if your “ignore the FUD” the strategy will work. But with Huobi worse FUD, the exchange becoming the next FTX would definitely devastate many investors and send shockwaves through the entire crypto space.

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