While many coins are seeing a mass sell-off amid a 7% overall correction of the crypto market, Tron's TRX project is on the rise. It all essentially boils down to the launch of the new USDD stablecoin and Justin Sun's desire to boost the Terra blockchain's market cap.
Thursday, 5 May, marked the launch of the algorithmic stablecoin USDD, which is pegged 1:1 to the US dollar. To maintain this exchange rate, USDD is also tied to the firm's native TRX coin. If the price of USDD drops, arbitrageurs are able to claim $1 worth of TRX in exchange for the stablecoin. Conversely, if USDD's price rises, arbitrageurs spend $1 worth of TRX and receive USDD in return.
The advantage of algorithmic stablecoins is the fact that their emission cannot be influenced by the developer. In contrast to centralised stablecoins (e.g., Tether), it is impossible to mint more coins in order to cover any expenses. One downside is the lack of stability of the entire system, which means that crypto panic selling could threaten the 1:1 peg with fiat and lead to the devaluation of the stablecoin.
In order to minimise this risk, Terra is also tying UST to its own Bitcoin reserves, which currently stand at 80,394 BTC or $2.9 billion. This step helped UST become the third-place stablecoin by market capitalisation with $18.7 billion. It also helped Terra win a 14.3% share of the DeFi market, where it is only surpassed by Ethereum.
USDD is basically a carbon copy of UST, which is why traders are expecting Terra to repeat its earlier success and are thus actively buying up TRX. Justin Sun, however, has not yet shared his plans to put together a bank of reserves for the stablecoin, while a series of scandals involving him personally have scared off many potential investors.
Tron currently sits in 19th place on the leaderboard, with a market cap of $8 billion. The network has more than 90 million addresses, and its low commission rates have enabled it to rack up $41.7 billion in TRC-20 USDT transactions. That's more than any other project. If Justin Sun manages to convince the community of the reliability of his new product, TRX could well continue to grow.
StormGain analytical group
(cryptocurrency trading, exchange and storage platform)