HUSD has lost about 70% of its value after Huobi ceased supporting cryptocurrency trading last week. Huobi’s native stablecoin, HUSD, has lost parity with the US dollar and has dropped by roughly 70% since the exchange delisted the asset last week. Its valuation fell to £0.24 at one time, the lowest in its three-year history.
Huobi, the top cryptocurrency exchange, said last week that it would no longer handle HUSD trading and recommended users who own the asset convert it to Tether (USDT) at a 1:1 ratio. The price of the HUSD fell due to the announcement, and it lost parity with the US dollar. It fell from £0.85 (when delisting) to around £0.27 (at the time of writing).
Stablecoins, such as HUSD, are linked to the value of generally stable fiat currencies, such as the US dollar and the euro, and precious metals like gold. Huobi has collaborated with Stable Universal and Paxos Trust Company to launch the token in 2019. The fiat-collateralized stablecoin is issued on the Ethereum blockchain. Its value remains constant with the US dollar, implying that each HUSD is expected to be backed by a dollar.
The asset’s collapse is similar to the collapse of another token earlier this year, UST. Terra’s algorithmic stablecoin lost its peg in May and fell far short of the £0.87 target. Terraform Labs tried to solve the issue by purchasing £1.74 billion in UST, but the move hyperinflated the sister token LUNA and drove both prices to near zero. The meltdown prompted widespread concern in the cryptocurrency community and large financial losses.
Nonetheless, HUSD is very different from UST; thus, the market may not repeat the same scenario. “TerraUSD crashed due to unexpected high “sell” pressure and plunged into a death spiral crash,” explained Neel Kukreti, Founder of Crypto Jargon. HUSD will not create a TerraUSD level crash because the liquidity issue on HUSD’s end may be resolved. Their team is working on it right now.”