The collapses of crypto exchange FTX, trading outfit Alameda Research, and hundreds of other organizations have diverted attention away from a few faltering enterprises. Take Justin Sun’s own “algorithmic” stablecoin USDD as an example.
On November 6 and 7, FTX withdrawals ceased to work. Two days later, the USD was affected by an event. On November 9, the price momentarily soared to $1.01 before beginning to decline. The USD fell from its $1 parity to as low as $0.97. The last time the stablecoin kept its guaranteed peg was on November 14 — precisely one month ago.
Sun’s algorithmic stablecoin is neither algorithmic nor stable, as it turns out. The whitepaper has been revised to incorporate the option to swap USDD for stablecoins such as tether (USDT) and USD coin (USDC). Nonetheless, it guarantees that the Tron DAO Reserve includes a mechanism to ensure the asset remains tied to the dollar. Obviously, this process failed.
Notable is the fact that the Tron DAO Reserve is presently giving “risk-free” dividends of roughly 50% on staking, a ratio that is both astounding and frightening.
This year, Sam Bankman-Fried and his company Alameda Research attempted to dissociate themselves from USDD trading. The currency was furthermore featured on numerous FTX trading sites. Alameda may have behaved as a market maker for USDD on FTX.
Even with a significant increase in activity last week and no meaningful method (or motive) to short the 57th largest cryptocurrency, USDD is still unable to regain its peg, indicating that the problem resides beyond the realm of short-sellers and market manipulation.
The main market for USDD is on the cryptocurrency exchange Huobi, which Sun is said to have acquired via his financial firm About Capital Management in October of this year. Its manager, Ted Chen, has joined Sun on the board of directors of Huobi. Leah Wald, a member of the Huobi board, is also the chief executive officer of Valkyrie Investments, another fund in which Sun has invested.