In a strategic move that has caught the attention of the crypto community, Tron’s USDD stablecoin has recently shifted 4,000 Bitcoin from its reserves, redirecting the assets into HTX (formerly known as Huobi). This adjustment, part of a broader strategy to optimize collateralization, has sparked debate over the stability and future of USDD, especially as its dollar peg experienced slight volatility, dipping to $0.9989.
Significant Bitcoin Reserve Reduction for USDD
Data from Arkham Intelligence revealed that the Tron DAO Reserve, responsible for maintaining the stability of USDD, has been systematically reducing its Bitcoin reserves over the past year, culminating in a 42% reduction. Despite this, the reserve still holds 8,000 Bitcoins. The current supply of USDD stands at 745 million, supported by a substantial collateral value of $1.723 billion. Interestingly, nearly 99% of this collateral is backed by Tron’s native cryptocurrency, TRX, which amounts to 10.93 million TRX.
Justin Sun Explains Collateralization Strategy
Tron founder Justin Sun has provided insight into the reasoning behind the reserve adjustments, likening USDD’s model to that of MakerDAO’s DAI. He explained that USDD employs a flexible collateralization system, where collateral can be withdrawn if it exceeds a certain threshold, typically between 120% and 150%. Conversely, if the collateral drops below 110%, additional assets are automatically added to prevent liquidation. Sun emphasized that this approach is fundamental to decentralized finance (DeFi), describing it as the “basics of DeFi 101.”
Sun also highlighted that USDD currently boasts a collateralization rate exceeding 300%, which, while ensuring stability, indicates lower capital efficiency. He mentioned plans to upgrade USDD to enhance its competitiveness as a decentralized stablecoin, reinforcing Tron’s position as a leading platform for stablecoins.
Tron’s TRX Benefits from Network Activity Surge
Amid these reserve adjustments, Tron’s TRX token has been gaining momentum, driven by a surge in network activity largely attributed to a memecoin craze on the Tron blockchain. This frenzy has propelled TRX to a 19% gain on the weekly chart, positioning it in close competition with Cardano’s ADA for the tenth spot in cryptocurrency rankings. TRX is currently trading around $0.1548, with a market capitalization of $13.45 billion, and there is growing anticipation that the token could approach its all-time high of $0.20.
The increased activity on Tron’s network has also significantly boosted daily revenue, a trend that Justin Sun has capitalized on. Sun has set an ambitious target of $4 billion in network revenue for the coming year, with plans to burn $1 billion of this revenue, allocate $2 billion to stakers, and cover transaction fees. This strategy underscores Sun’s bullish stance on Tron’s future, particularly in leveraging the ongoing memecoin trend.
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