TRON (TRX) founder Justin Sun has come out in defense of the network stablecoin, USDD. The digital asset began deppeging from the U.S. dollar value and hinted at another catastrophic event in the crypto market, like the one experienced by Terra (LUNA) and its native stablecoin UST.

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At the time of writing, the value of TRON’s stablecoin has been climbing back to its 1:1 parity to the U.S. dollar. Earlier, the digital asset started trending to the downside forcing the TRON DAO Reserve, the entity responsible for protecting USDD’s peg, to deploy $2 billion.

This created an increase in selling pressure for TRX which moved to the downside on the back of this event, and a crypto market already trending to the downside along with traditional investments.

Justin Sun wrote the following via his Twitter account, at this time, TRX shorters had the opportunity to benefit from market conditions:

Funding rate of shorting TRX on Binance is negative 500% APR. Trondao Reserve will deploy 2 billion USD to fight them. I don’t think they can last for even 24 hours. Short squeeze is coming.

The TRON DAO Reserves continued to inject millions to protect the USDD peg to the U.S. dollar. Due to its mint and burn mechanism, the price of TRX broke below critical support levels but became more stable as USDD returned to its U.S. dollar parity.

In the last few hours, the entity in charge of protecting USDD claims it has increased the stablecoin’s collateralization to meet “extreme market conditions”. The collateralization rate reported by this entity stands above 300%. The entity wrote the following:

To safeguard the overall blockchain industry and crypto market, TRON DAO Reserve have increased 650,000,000 USDC supply on TRON. Currently USDC supply on TRON has reached $2.5 billion.

Data from Material Indicators shows thin support for TRX’s price as it approaches these levels. Currently, there are around $500,000 in bid orders with no extra support below.

This suggests TRX’s price could continue to see losses if bulls are unable to maintain current levels. Additional data from Material Indicators records an increase in selling pressure from small investors.

As seen below, retail investors (yellow and green on the chart) have been shaken out of their positions as TRX crashes. Larger investors seem more resilient and willing to buy into the current price action.

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This could support a short squeeze scenario, as Sun claimed. However, the market continues to trend to the downside and could re-test lower levels.

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