The Tron DAO is continuing to stockpile TRX to increase its reserves.
Tron DAO increases reserves in TRX
The Tron DAO Reserve, the organization that replaced the Tron Foundation, has decided to buy $38 million of the crypto Tron (TRX) with a view to bolstering the network’s reserves, especially after what happened with the collapse of Terra and its stablecoin.
In doing so, Tron wanted to send a signal to the market about its desire to defend and strengthen its USDD algorithmic stablecoin launched on 5 May.
— USDD (@usddio) May 5, 2022
On 12 May, the DAO Reserve announced via Twitter that it had also purchased 1250 BTC in order to safeguard the entire cryptocurrency market.
The market was hit hard by the declines after the news about the collapse of the entire Terra ecosystem and a number of speculations that had affected the entire stablecoin market, starting with Tether, which is capitalized at $83 billion.
— TRON DAO Reserve (@trondaoreserve) May 12, 2022
On the same day, Tron’s DAO announced that it had also purchased 200 million Tether for $0.985 per unit, for a total of about $197 million.
This was to stop speculation, which, after the failure of the Terra project, was bound to cast a suspicious eye on precisely those who, like Tron, had created an algorithmic stablecoin project.
USDD, the stablecoin of the Tron project
Justin Sun, CEO of Tron, said he does not fear a domino effect, like what happened after the Lehman Brothers bankruptcy in traditional finance in 2008. “I still believe in algorithmic stablecoins,” he told CoinDesk in an interview.
According to the whitepaper, published in late April, Tron’s stablecoin would maintain its anchor via a minting/mastering process that converts $1 USDD into $1 TRX, the native token of Tron’s blockchain. Conversely, $1 of TRX could be burned to mint a USDD.
Currently, USDD’s capitalization would be just under $300 million. Certainly not comparable to that of UST, which before the collapse capitalized around $14 billion.
On the subject of Terra’s failure, Justin Sun seems to have very clear ideas and certainly does not fear that the same might happen to his project. In fact, he stated thus:
“I think the failure of LUNA was not because algorithmic stablecoins are not viable or are not doable. LUNA’s failure mainly depended on too much leverage. They grew to a dramatic market cap in a very short period of time. When we designed USDD, we focused on the healthy growth of USDD. We want to keep our USDD market cap relatively small compared to TRX and total market cap. And also at the same time, smaller than the Tron DAO Reserve”.