Stablecoins are cryptocurrencies that are free from the volatility of the broader market. However, the events of recent months have shown that stablecoins are also vulnerable to price dips. Multiple stablecoins have lost their peg since the bear market intensified, with the Huobi stablecoin being the latest one to lose its peg.

Huobi stablecoin (HUSD) loses peg

Huobi stablecoin (HUSD) is supposed to hold parity with the US dollar. On August 18, it lost the peg, falling to around $0.82, according to CoinGecko. However, at the time, HUSD had recovered, trading at $0.99 and gaining 8.4% during the past 24 hours.

HUSD is a stablecoin issued by the Hong Kong-based Stable Universal. It is an ERC-20 token created on the Ethereum blockchain. Its developers say that it is a safe and secure currency that brings together the stability of the US dollar with the efficiency of blockchain technology.

With HUSD losing its peg, the stablecoin’s liquidity on the Curve 3pool was affected. Curve is one of the best DeFi exchanges, and it issued a statement saying that the currency exchange rate for the stablecoin was too low.

The depeg also followed the removal of HUSD from the list of supported USD-backed stablecoins by the FTX exchange. The reason behind the depeg is still unclear, but Huobi Global issued a statement saying it was aware of a liquidity issue with the token. It further said it would work with the HUSD issuer to find a solution to the issue and restore the peg.

The stablecoin issuer seems to have solved the liquidity issues, and the peg has been regained faster than was expected. However, the events surrounding the depeg are a mystery because, unlike the other stablecoins that have collapsed because of being algorithmically backed, HUSD was backed by US dollars.

Stablecoins are not so stable

As aforementioned, the stability of stablecoins has been tested during the ongoing bear market. Stablecoins are designed to protect investors from the volatility of the broader cryptocurrency market by providing efficiency and security.

However, in recent months, some stablecoins have proven to be even more volatile than other cryptocurrencies. Several stablecoins have lost their peg over the past month. The situation started with TerraUSD (UST), which lost its peg in May and caused the collapse of the Terra Luna ecosystem.

Amid the crypto market turbulence in May, many stablecoins were tested, and one of these was USDT, which Tether issues. Tether briefly lost its peg but recovered shortly after. At the time, USDT was also under pressure from FUD regarding the stablecoin’s reserve backing.

In June, Tron’s algorithmic stablecoin, USDD, also lost its peg and dropped to $0.925. However, Tron used collateral to restore the peg. The peg was regained several weeks later.

The Acala stablecoin was the latest to depeg after losing 99% of its value after a hack on the protocol. aUSD dropped to below $0. However, the team voted on burning the tokens minted by the hacker. At the time of writing, aUSD was yet to reclaim its peg, trading at $0.84.


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