The stablecoin HUSD has dropped below its dollar-peg target. According to CoinGecko statistics, the stablecoin lost parity with the US dollar on Tuesday, dropping to as low as $0.90 before recovering to $0.98 as of 8:30 a.m. ET.
HUSD is a stablecoin that is centralised. It operates as an ERC-20 token on Ethereum that monitors the value of the U.S. dollar and has a market capitalization of around $187 million. HUSD is popularly connected with the Huobi Global cryptocurrency exchange, however, its operations are managed by the Hong Kong-based company Stable Universal. Huobi’s venture capital arm Huobi Capital invested in Stable Universal in 2019.
This is not the first time that HUSD has fallen below parity with the dollar. In August, the asset fell below $0.90 before regaining parity with the dollar a few hours later. At the time, the exchange attributed the volatility of the stablecoin to liquidity problems, adding that it “decided to cancel many accounts in various countries to meet regulatory standards.”
The stablecoin may have lost its dollar parity owing to Huobi Global’s move to delist 21 HUSD trading pairs without an explanation.
In this case, the delisting of HUSD on Huobi may have harmed the stablecoin’s market sentiment, resulting in market sell-offs. Alameda Research apparently withdrew 70,000 HUSD from Huobi on Monday before exchanging 50,000 HUSD for other stablecoins like DAI, USDT, and USDC on Curve’s decentralised exchange, according to PeckShield’s security experts.
Stablecoin depegs have been a common occurrence this year, especially following the collapse of Terra’s algorithmic stablecoin UST, which knocked more than $40 billion off the value of the larger cryptocurrency market. In June, Decentralized Dollar (USDD), Tron’s decentralised stablecoin, lost parity with the US dollar before regaining it in subsequent weeks.
Unlike stablecoins whose value is derived from an algorithm or crypto collateral reserves, HUSD is said to be backed by cash reserves held by Stable Universal.