Tron founder Justin Sun said in a tweet on Monday that the Tron DAO Reserve would deploy $2 billion to fight short sellers as the price of tron (TRX) slid.
"I don't think they can last for even 24 hours. Short squeeze is coming," Sun wrote, as the price of TRX fell more than 16% overnight, according to data from Coinmarketcap.
A short squeeze occurs when traders who are betting on a decline are forced to close their positions by buying back the underlying token. Sun noted that the so-called funding rate for shorting TRX on Binance had hit 500%.
Meanwhile, Tron's stablecoin, USDD, was trading at $0.98 at its lowest point on Monday morning. The token — which was at first a near-carbon copy of Terra’s algorithmic stablecoin UST — arrived on the Tron blockchain on May 5 and is supposed to track the price of the US dollar.
The project had been preparing for potential market turbulence following the collapse of Terra. Initially designed to maintain its peg to the dollar algorithmically, albeit with some backing, Sun said earlier in June that USDD would now be overcollateralized.
The Tron DAO Reserve said on Saturday that it had bought $50 million worth of bitcoin and TRX.
A reserve comprised of cryptocurrencies and other stablecoins was amassed to overcollateralize USDD and was guaranteed to be maintained at a minimum of 130% of the total amount of USDD in issuance.
Tron said that it would begin publishing real-time updates on the collateral ratio on the Tron DAO Reserve website from June 5. The ratio on Monday morning was 280%.