The stablecoin HUSD has fallen below its intended dollar peg. The stablecoin lost its parity with the US dollar on Tuesday, falling to as low as $0.90 before rebounding to $0.98 as of 8:30 a.m. ET, according to data from CoinGecko.
HUSD is a centralized stablecoin. It functions as an ERC-20 token on Ethereum that tracks the price of the U.S. dollar and has an estimated market capitalization of $187 million. While it is commonly associated with Huobi Global crypto exchange, HUSD's operations are controlled by Stable Universal, a Hong Kong firm. In 2019, Huobi’s venture arm Huobi Capital made an investment in Stable Universal.
This is not the first time HUSD lost parity with the dollar. In August, the asset had fallen below $0.90 only to regain dollar parity a few hours later. At the time, the exchange blamed the stablecoin's volatility on liquidity issues, explaining it made a “decision to close several accounts in specific regions to comply with legal requirements." However, this time, the firm has not issued a statement yet.
While it's not immediately clear why the stablecoin lost its dollar parity, it may be due to Huobi Global’s decision to delist 21 HUSD trading pairs without offering a clear explanation.
Here, HUSD upcoming delistings on Huobi may have hurt the stablecoin’s market sentiment, leading to market sell-offs. The most notable HUSD sell-off came from an address tagged on Etherscan as Alameda Research which reportedly withdrew 70,000 HUSD from Huobi on Monday, only to later swap 50,000 HUSD for other stablecoins like DAI, USDT and USDC on Curve’s decentralized exchange, as reported by security analysts PeckShield.
Stablecoin depegs have become a recurring event during the broader downturn in the crypto space this year, particularly after the collapse of Terra’s algorithmic stablecoin UST, an incident which wiped more than $40 billion in value off the broader crypto market. In June, Tron’s decentralized stablecoin called Decentralized Dollar (USDD) similarly lost its parity with the US dollar but regained it in the following weeks.
Unlike stablecoins that derive their value via an algorithm or crypto collateral reserves, HUSD is claimed to be backed by cash reserves maintained by Stable Universal.
© 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.