HUSD stablecoin loses US dollar peg, drops to $0.90 as liquidity shrinks

Quick Take

  • HUSD fell to as low as $0.88 as the stablecoin lost its US dollar peg.
  • The liquidity of HUSD on Curve is also drying up with the pool becoming severely unbalanced.

HUSD, a stablecoin issued by Stable Universal, has lost its peg to the US dollar, falling as low as $0.88 on Thursday, according to CoinGecko.

The stablecoin is trading at $0.90 as of the time of publishing. The first leg down in the price gave way to a recovery to 97 cents. This leg up was, however, short-lived as the stablecoin plunged again.

The depegging event has also led to a reduction in the liquidity available for trading HUSD. This shrinking liquidity is likely due to traders exiting their HUSD positions.

HUSD’s liquidity on the Curve 3pool (3Crv) — the largest liquidity pool on the decentralized exchange Curve — has become unbalanced. The currency reserve breakdown for the pool is now at a ratio of 92% HUSD to 7.35% 3Crv which is the most unbalanced this pool has ever been. An unbalanced pool means that there is not enough liquidity to honor swaps for one token in the pool.

In this case, HUSD is becoming more illiquid as there are not enough 3Crv tokens to swap in exchange for the depegged stablecoin. 3Crv is a stablecoin pool that contains deposits of the three largest stablecoins USDT, USDC, and DAI.

The Huobi-backed Stable Universal has stated in previous attestations that HUSD was wholly backed by cash reserves. Stablecoin issuer Paxos was the original custodian upon HUSD’s launch. This arrangement ended in June 2021 with Huobi Trust taking over the role as custodian.

“We are aware of the current liquidity issues associated with the HUSD stablecoin, which is issued by Stable Universal Limited and built on the Ethereum network,” Huobi said today on Twitter.


© 2023 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.