Why is this stablecoin unable to keep its peg value stable at $1?

Stablecoin is a cryptocurrency backed by dollars and maintains its pegged value against it; in case of losing parity, it could collapse.

No need to mention that currently, the market is being talked about all over the place, but not for the right reasons as if it’s attaining new heights in its value or bringing some real-life values. Rather the massive sell-offs resulting in the crypto market crash have been the point of conversation. Moreover, not just general crypto assets, stablecoins are also facing tremendous pressure despite being the popular asset class across the crypto market.

This skepticism about stablecoins emerged after the collapse of the Terra network, followed by its algorithmic stablecoin UST losing its parity with the US dollar. Similar uncertainties and doubtful concerns are emerging, but this time it’s for the USDD stablecoin of the TRON network. The latest cryptocurrency of TRON, USDD, seems to depeg as it continuously drops and falls from $1 value.

USDD is facing a similar situation to UST stablecoin as it is getting deflated from its peg with USD. The price of USDD stablecoin, which should fundamentally be $1 to maintain its peg value, has dropped and faced $0.99, $0.97, and at some instances, it even touched the lowest in a day, $0.995. The price drop is a matter of concern as the difference in the USDD’s value and the US dollar should not be there ideally.

To make the situation worse, USDD has reached its all-time low of $0.9255, which later has rebounded to $0.9632; it is expected that the price may drop further in the upcoming hours and days. Even at this level, it is still unclear why the value of USDD is still going down and not showing any sign of recovery, given the core mechanics of TRON’s stablecoin should prevent such instances of deviation and stay firm in a place for a long time.

Doubts and uncertainties about USDD’s inability to regain its peg value are also high considering the fresh instance of UST stablecoin losing its parity in just a short span of days. If USDD would follow Terra’s UST stablecoin, then there are possibilities that it could also drop from its $1 ideal value to $0.05 in a matter of a few days. Such instances are not good for the image of algorithmic stablecoins and the overall crypto market. Instead of being interesting to people, they could turn them off and put them far away from the crypto industry.

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