Justin Sun, the co-founder of Tron and former Permanent Representative of Grenada to the World Trade Organization (WTO), has once again made headlines.

Yesterday, on January 15, Sun unveiled an improved version of the USDD algorithmic stablecoin.

Justin Sun Announces USDD 2.0 – A New Algorithmic Stablecoin With High Yield

USDD 2.0, according to Sun, will offer a 20% Annual Percentage Yield (APY) fully subsidized by the Tron DAO.

Unsurprisingly, the promise of a 20% APY at a time when the United States Federal Reserve and central banks are reducing interest rates has sparked excitement in some quarters.

However, skepticism surrounds this new offering. The collapse of the UST stablecoin, which led to LUNA's downfall and landed Do Kwon, co-founder of the Terraform Labs, in prison, is a stark reminder of the risks involved.

Despite the alluring yield, the parallels between USDD and UST raise questions regarding sustainability.

Sun did not clarify the source of this high yield, stating the team has 'plenty of money'.

What’s Special About USDD?

To understand USDD, it’s essential to grasp the fundamental objective of all USD-pegged stablecoins: maintaining parity with the US dollar.

While USDT and USDC are backed by fiat currencies and assets, including U.S. Treasuries, USDD operates as an algorithmic stablecoin.

It is backed by multiple assets, including TRX and USDT, with claims of being over-collateralized at 346%.

Following its launch in May 2022, USDD offered an astounding 30% APY, which later had to be reduced due to market irritation from declining crypto prices.

Despite the lower rate of 20%, the potential impact on market dynamics and TRX price remains uncertain. Many analysts believe a revival in crypto could hinge on external factors, including upcoming political events affecting market sentiment.

Based on Etherscan data, USDD currently holds a market cap of $745 million with one address controlling 97% of the total tokens in circulation.

Will Tron (TRX) Rally After New Stablecoin – Could This Be The Bottom For TRX Price?

While USDD presents high risks, it also allows for potential TRX gains since USDD is backed by diverse assets, including TRX. A demand uptick could elevate TRX prices above $0.30, potentially reaching towards $0.45.

TRX has seen a decline of over 50% since reaching $0.45 last year, with traders eyeing the $0.20 support level. A rally or defense of recent gains could see TRX reclaim $0.30 in the following days.

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Key takeaways

• Justin Sun launches USDD 2.0, offering a 20% APY.
• The market remains vigilant after the UST and LUNA collapse.
• TRX prices may recover, finding support at $0.20.