TRX, the native token of the Tron network, experienced a notable 9.5% increase in June, surpassing competitors such as Solana’s SOL and Ethereum (ETH), which saw declines of 9% and 11%, respectively, during the same period.
A significant event coincided with TRX’s rise: Justin Sun, founder of Tron, transferred over $21 million worth of TRX to Binance from a linked wallet. This has led traders to question the sustainability of TRX’s rally above $0.12.
On June 27, data from Arkham Intelligence revealed that Sun moved 173.8 million TRX valued at $21.4 million to a Binance deposit address. The day prior, Tron’s total value locked (TVL) hit a six-month low of $7.5 billion, according to DefiLlama, indicating that despite TRX’s price surge, major investors are withdrawing funds from the ecosystem.
Notably, 75% of the network’s total deposits are concentrated in a single decentralized application, JustLend, which experienced a 15% reduction in assets over 30 days. Concerns have arisen about Tron’s ecosystem sustainability, especially since 94% of JustLend’s deposits are in BTCT, a TRC-20 token supposedly equivalent to Bitcoin (BTC).
Exponential.fi data suggests that the $5.3 billion in BTCT deposits at JustLend yield 0%, raising questions about who truly benefits from these assets beyond typical users of the decentralized finance application.
Further analysis by Exponential.fi criticized JustLend’s BTC pool for its significant “collateral risk” and a “reflexive” security mechanism aimed at mitigating the volatility of other digital assets. They also pointed out the “high centralization” of network validators, warning of potential total investment loss due to underlying chain issues.
Despite these issues, Tron’s token price trend does not align ideally with the growth of its network, especially since none of its decentralized applications are listed among the top global protocols by fees.
Ethereum remains the undisputed leader in its ecosystem, with Solana also gaining prominence through applications like Raydium, Jito, and Marinade. Tron, despite handling multibillion-dollar volumes in Tether (USDT), faces challenges with other stablecoin providers, including U.S.-based issuer Circle.
Circle discontinued support for its TRC-20 USDC version on February 20, citing concerns over trust, safety, and transparency. Additionally, Binance ceased support for USDC on the TRC-20 network on March 25, further impacting investor confidence in Tron’s ecosystem.
In April 2024, the U.S. Securities and Exchange Commission reiterated allegations against Justin Sun and his companies regarding the sale of unregistered securities through Tron and BitTorrent (BTT) tokens. The SEC accused Sun of engaging in “manipulative wash trading,” targeting consumers and investors in the United States.
Despite these challenges, TRX has managed to outperform SOL and ETH by nearly 20% over the past 30 days. However, with declining Tron network TVL and indications of potential selling from wallets associated with Sun, the sustainability of TRX maintaining the $0.12 support level remains uncertain.
It’s important to note that this article does not provide investment advice. Readers should conduct their own research and assessment before making any investment decisions.