Not every crypto is spilling red ink this year. While bitcoin is down about 37% in 2022, Tron (TRX) is up about 10% this year. And most of the gains have happened in the last 30 days.
Last month, Tron launched the USDD stablecoin. USDD is an algorithmic stablecoin. One USDD is supposed to equal $1. And the peg is maintained by burning TRX to mint USDD or converting USDD into TRX.
If that sounds familiar to you, it should. Terra and UST used a similar process to maintain the UST stablecoin peg. It worked until it failed spectacularly. Now UST and Terra (now called Terra Classic) are worthless.
Will Tron succeed where Terra failed? I’m skeptical. Algorithmic stablecoins have to prove a lot to me before I even consider investing in a project that’s either part of or adjacent to the process.
Algorithmic stablecoin concerns are only a small part of why I’m not interested in investing in Tron. My bigger concerns are about Tron founder Justin Sun.
Sun has a reputation for pushing ethical, legal and business boundaries in ways that I’m not comfortable with. This story from The Verge does a good job in detailing some of this.
In case you don’t want to click through, here’s an excerpt:
The “market-making team” was led by a technocratic, reserved man with thin-framed glasses named Baolong Xu. One day, Xu went to lunch at a nearby restaurant that serves traditional Chinese seafood with a former employee. They were eating a stewed freshwater fish called crucian when Xu began explaining his job was “to make sure the TRX price is at some level Justin wants.” Over the course of his explanation, Xu explained that Sun directed them to buy TRX when his team knew that Tron was planning to announce good news to the public. After Tron made the announcement, the token’s value shot up, and they sold at a major profit. “I was kind of scared,” the former employee told me. “He was doing the so-called market making, insider trading all the time.”
When another former employee asked Sun’s top lieutenant in Beijing what “market making” meant, he chuckled and said, “You know how the Chinese folks do it, right?” He apparently explained that the market-making team’s job was to work with “whales” who were wealthy cryptocurrency spenders outside of Tron. “We have a way to pump the price [of TRX],” he said. “You know those folks that have a lot of money and don’t have a lot of brains? You can influence them to do whatever you want them to do.” The team’s operations had ventured into the realm of what was essentially wholesale market manipulation.
(Tron and BitTorrent did not respond to a request for comment.)
To be fair, a law firm working for Sun has denied all of these allegations. Once again from The Verge:
The law firm that is litigation counsel for Sun’s companies, Harder LLP, responded with the statement: “This story is yet another attempt by Mr. Harland-Dunaway to impair the reputation of Justin Sun. Poloniex and BitTorrent will not dignify these allegations with a response.“
But this isn’t the first time I’ve heard this sort of story about Tron and Sun. I have no evidence or proof (nor have I seen any) to know if any of this is true. But I’ve heard the story enough times that I’ve decided to pass on Tron.
It’s a shame. I have a natural affinity for things named Tron. I loved the video game. I loved the movie. I even want to name a dog Tron eventually. But as far as Tron the crypto goes, I’m staying far away.
That’s my choice. I can understand why others think differently. Tron is the rare crypto this year that’s looking up. Investors need to make decisions according to the factors that are important to them.
I’ve made mine. And I’m okay with it.