- Justin Sun downplayed USDD risk fears after withdrawing his 12,000 BTC collateral.
- Despite the reassurance, one analyst viewed Sun as a likely risk factor in the sector.
Tron [TRX] founder Justin Sun made headlines this week after withdrawing from Bitcoin [BTC]which was initially set up as collateral for the Tron-based stablecoin, Decentralized USD [USDD].
He drawn 12K BTC, worth over $700 million based on press time market prices, without any approval from Tron DAO.
This created fears of liquidation as the community worried about a Terra Luna-like scenario that could be triggered.
Justin Sun defends himself
However, Sun downplayed the fears and defended his unilateral action as “DeFi 101.” Part of his statement on X (formerly Twitter) read:
“If your collateral exceeds the amount specified by the system (usually between 120% and 150% depending on the vault), any collateral holder can freely withdraw any amount without anyone else’s permission.”
Sun added that there could only be a liquidation risk if the collateral fell below 110%, as this would need to be replenished.
“If the collateral falls below a certain level (usually below 110%), it must be replenished; otherwise, the collateral could lead to liquidation. This is part of the basics of DeFi 101.”
As a result, according to Sun, given that USDD was over-collateralized by 300%, he did not need approval for his actions, and the move did not pose any liquidation risk.
Fears still exist
Despite Sun’s reassurance, some users seemed unconvinced. In fact, well-known market commentator Marty Party singular labeled him as a major risk factor for the crypto industry.
“I also reported that Sun and WBTC are the second largest risk in crypto.”
For context, BTC (WBTC) custody was wrapped up last week changes also raised fears after Justin Sun was named as involved in his activities.
Since the announcement of the custody changes, $90 million has been repaid from WBTC. Half of that ($45 million) was cashed in the last 24 hours, an analyst said projected that investors may be looking for a ‘reliable alternative’.
“$90M WBTC has been redeemed since Bitgo’s announcement. The community and industry are looking for a more reliable, institutional-quality alternative.”
Source: Dune