A large amount of USDT was recently transferred from an unknown address to the Binance exchange. While members of the community began to panic as to who was behind the operation, Whale himself came out and explained the nature of the transaction.
The transaction amount will be used as collateral to back up the USDD stablecoin recently launched by Tron. Justin Sun announced that $100 million will be used to buy BTC and TRX, which will be used in UST similar to Luna and BTC.
The scheme requires the sale and purchase of volatile assets in order to control the value of the USDD algorithmic stablecoin. In order to attract more buying volume from investors and traders, USDD offers higher yields for those who are willing to provide liquidity for the stablecoin.
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Following the Terra disaster, Sun faced criticism from investors throughout the cryptocurrency community, especially after announcing that USD would be backed with a volatile asset similar to UST.
The main issue with the BTC and TRX support concept is the volatile nature of a digital asset that can lose up to 50% of its value in a matter of days – if not hours. To maintain balance and be able to hold the USD peg, USDD must maintain a relatively low capitalization that can be absorbed by the collateral behind it.
At press time, the USDD capitalization remains at $702 million, which can be covered by the Tron Reserve DAO without any problems. If the capitalization exceeds about $5 billion, the TRON Foundation will need to raise the collateral on the back of the stablecoin to avoid UST and LUNA on Terra.
