In a context of maximum stress in the markets, the much-discussed founder of the Tron blockchain, Justin Sun, wants to be reassuring. He envisions a faster recovery than after the 2018 crash, followed by two years of crypto winter.
Ambassador of Grenada to the WTO, but above all a global star of the blockchain, Justin Sun stood out in the crypto market debacle with the good performance of the price of the TRX token of his Tron blockchain. In 2022, Tron will even show interesting growth, with 98 million user accounts, 3.3 billion transactions and 7.8 billion total value blocked. However, Justin Sun does not escape the doubts lingering over decentralized finance and stablecoins. In the wake of the collapse of Luna and its stablecoin UST, Tron’s USDD has lost parity with the dollar over the past month. Despite mounting terrifying news, including the insolvency of the flagship platform Celsius, Justin Sun shows his serenity and does not envision a crypto winter as long as 2018-2019.
After the UST crash, Luna’s stablecoin, the stablecoin you launched, USDD, started to lose parity with the dollar. Is the situation under control?
2.5% difference against the dollar, I wouldn’t call it “depeg” like in the case of Luna. We consider the +5%/-5% range against the dollar to be acceptable volatility. We have increased our collateral reserves. Currently, the USDD has a collateral rate of over 320%, comprising over a billion USDC, 140 million USDT, 10 billion TRX (Tron), as well as over 14,000 BTC. That’s the equivalent of $2.4 billion, while USDD issuance remains under control, with only 700 million units in circulation so far.
The fear of reliving the UST and Luna scenario with the USDD and Tron is still there. Especially since you posted the exact same tweet as Do Kwon, the founder of Luna, after the UST crash started. Was the allusion intentional?
Yes, it was some kind of joke, a “crypto-meme”. More seriously, the situations of the two stablecoins are very different. UST had grown too fast and had problems that were not solved. We have to imagine the case of Luna as a central bank that prints everything. We have our own, more controlled monetary policy. Luna is a bit like Zimbabwe’s Central Bank, and we, Japan’s.
Some question your ability to hold 40% return on USDD in the long run…
We are putting the resources to support the USDD. The Tron reserve behaves more or less like a central bank trying to support the price of its currency in such a situation. That does not mean that yields will remain at this level forever, we will adapt the strategy to the evolution of the situation.
The market is down nearly 70% since its peak in November. What could make the situation worse?
The spread of panic in the market remains an important risk factor. Cryptocurrency as an asset class also continues to depend on the overall macroeconomic environment. But the correction over the past few months is part of normal volatility.
“Luna is a bit like the Central Bank of Zimbabwe, and we are Japan’s.”
Justin Sun, founder of Tron
Synthetic ether stETH also lost parity with ether, leading to the insolvency of the Celsius platform and the difficulties of the 3AC fund. Is a snowball effect to be feared?
3AC, Luna, Celsius, these events led to a loss of confidence and significant sales. We should not forget that the crash in the traditional financial sector in 2008 was essentially related to the liquidation of players. Everyone then wondered what the next bankruptcy would be. As for the stETH, I think measures will be taken that will allow the situation to be resolved. But certainly everyone in the market right now is fearful, and fear is a double-edged sword. On the one hand, we can learn from it, improve ourselves, so that better companies and projects can stand out. On the other hand, it can also sink a good project.
Do you think the market has bottomed out and can we expect a two-year crypto winter like 2018-2019?
We shouldn’t be far from the bottom. The situation is different from 2018 and after so many years of development, blockchain and cryptocurrencies are gradually being accepted and adopted around the world. This was mentioned at the twelfth WTO ministerial conference, which I just attended. This is a major trend of our time and it is inevitable. It will take some time to restore market confidence, but the bear market will not last too long. I have multiplied conversations with ambassadors from Hong Kong and China in particular, as well as with our partners in the Caribbean. I will be organizing workshops and educational sessions to continue to raise awareness among my discussion partners. The low transfer costs, the easy accessibility of the blockchain for often unbanked populations are arguments that now weigh.
Joan Plancade is an economic and investigative journalist for Bilan, a critical observer of the Swiss and international tech scene. He is interested in fundamental trends that are reshaping the economy and society.
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