Justin Sun Withdraws 12,000 Bitcoin from USDD Collateral, Sparking Community Concerns

• Justin Sun’s withdrawal of 12,000 Bitcoin from USDD’s reserves shifts the stablecoin’s collateral heavily towards TRX, raising stability concerns.
• USDD, once supported by a mix of Bitcoin and TRX, is now almost entirely backed by TRX, increasing its vulnerability to market fluctuations.
• The crypto community is closely monitoring USDD’s ability to maintain its peg after the significant change in its collateral structure.

Justin Sun, the billionaire behind the Tron ecosystem, has made a significant move by withdrawing 12,000 Bitcoin from the reserves backing the USDD stablecoin. This action, which equates to approximately $735 million, has sparked concerns within the cryptocurrency community about the long-term stability of USDD and the transparency of its governance. 

USDD Now Heavily Backed by TRX

Before this withdrawal, USDD had been overcollateralized with Bitcoin, providing investors a sense of security due to the cryptocurrency’s global recognition and market value. The recent removal of Bitcoin from the reserves has shifted the collateral makeup, leaving USDD almost entirely backed by TRX, the native token of the Tron network. Only a small portion remains backed by USDT. Currently, USDD is overcollateralized at 230%, but nearly 99% of that collateral now consists of TRX, amounting to $1.703 billion. 

The decision has led to widespread discussions in the community, with many questioning the sustainability of USDD, especially in light of the recent turmoil experienced by other algorithmic stablecoins like TerraUSD (LUNA). The removal of Bitcoin, which was seen as a robust reserve asset, has heightened fears of a potential debug scenario, where USDD could lose its dollar peg and lead to market instability. 

Tron DAO Reserve’s Role in the Shift

Traders and investors have also taken keen note of the 12,000 bitcoins that were withdrawn from the USDD reserves and relocated to HTX as reported by Tron DAO Reserve. There are at present about 745 million USDD coins supplied, with most of its backing primarily in TRX, this exposes the stablecoin to market volatility disadvantage.

Problems and solutions; Recommendations for the future of USDD

As USDD moves to this new phase, its transformation in the structure of its collateral has raised questions about what it will be. Due to the utilization of TRX, the stability factor is increased, and this may affect the functional capability of the stablecoin during bearish runs. Tron ecosystem will next be keenly watched to see how they are going to manage these changes and how the stablecoin will hold up to the increasing pressure.