BEIJING, CHINA - NOVEMBER 04: Justin Sun Yuchen, founder of Tron and CEO of BitTorrent, speaks during Ifeng Finance Summit at China World Summit Wing on November 4, 2015 in Beijing, China. Irrational exuberance is usually associated with bull markets, but here is an example showing markets can be unreasonable even during periods of gloom and doom.
The mechanism makes these stablecoins vulnerable to death spirals – a situation where both coins move in the same direction, i.e. lower, eventually leading to a collapse of the ecosystem,Terra’s crash. An ideal collateral should be inversely correlated to the stablecoin. However, some investors haven’t taken lessons from Terra’s UST, as evidenced from USDD’s growth or perhaps lending USDD is a low risk-high reward trade right now, as the ecosystem is still relatively small and could be defended by Tron DAO and Tron's CEO Justin Sun for now. Before the crash, UST was the world's biggest algorithmic stablecoin with a market value of $18 billion, while LUNA was one of the top 10 cryptocurrencies.
Lastly, Tron's CEO Justin Sun has been a controversial figure in crypto, known for marketing stunts and self promotion, almost like Terra's Do Kwon."More audacious than his reputation, Sun has an even riskier approach to U.S. and Chinese financial regulations — and is often trying to evade them,"Still, Tron’s decision to outdo Terra by promising a 30% yield on USDD’s inception has boded well for Tron’s entire ecosystem for now.