Is this the first crypto winter publicity stunt?

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Not all crypto locks are created equal. Most are planned accidents, although some may be designed in your image and likeness.

That is Tron, which is a blockchain network on the Ethereum model. It includes a token valued at $700 million, usdd, which has been among the most obvious targets of crypto attack in recent weeks.

Usdd (launched May 5) is a decentralized algorithmic stablecoin that applies an arbitrage mechanism almost identical to Do Kwon’s Luna/Terra coin (which crashed May 10). Tron’s white paper for the coin has been removed and rewritten this month to add a promise of “guaranteed over-collateralization using multiple major cryptocurrencies.” (The older version is in Web.File.)

Usdd finally broke the money late last week:

© Coinmarketcap

Justin Sun, the permanently online founder of Tron, has blamed the network’s native trx coin for becoming a crowded short circuit:

Sun is the most tenacious publicity hound of cryptocurrencies. A vanity website draws heavily on his role as “Ambassador and Permanent Representative to the WTO in Grenada,” which last week saw him speak on blockchain at the WTO Ministerial Conference. (Tourism, which before the pandemic provided more than half of Grenada’s GDP, was not mentioned.)

In 2019, Sun paid $4.6 million to have dinner with Warren Buffett, then canceled, then, in reshuffling, gave Buffett a phone loaded with bitcoin. A year later, he was sucking exhaust fumes from NFT’s high-art car while identifying himself as a meme bagger.

Any entrepreneur who relies so heavily on self-advertising will be vulnerable to the law of diminishing returns. So it was with Sun’s earlier attempts to bolster confidence, with reserve injections providing no more than short-term relief.

The market response to a withdrawal of deposits for the sanctity of cryptocurrencies has been much more positive:

Tron to USD chart © Coinmarketcap

That’s because declared reserves are not Tron’s problem. The plummeting value of its native token is basically irrelevant to everyone but hodlers, because the usdd stablecoin is (on paper) more than guaranteed by Tron’s $1 billion USD Coin and $140 million in reserves. of Tether.

Tron’s problem is that it’s a lobster pot. There is no redemption mechanism for usdd. Once you get in, there is no way out other than through the secondary market.

The only arbitrage opportunity offered to usdd hodlers is to exchange one dollar’s worth of tokens into newly minted trx. Sun and Tron’s grand council are the only ones with direct access to reserves, so they can choose whether to restore the peg or toggle on and off whichever asset makes the most noise.

Pulling Tron trx deposits out of Binance therefore looks like an attempt to drown liquidity in what is the crypto equivalent of a very short small cap. It’s not a Terra/Luna arbitrage breakout, it has a lot more in common with simple meme-style manipulation of supply and demand stocks.

Sun, however, has been very keen to make shorteners think otherwise:

Other readings:
The Many Leaks of Justin Sun — The Verge

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