The USDD algorithmic stablecoin is yet to attain its peg. At the time of writing, USDD was trading at $0.97, according to CoinMarketCap. The token has been under pressure following recent news that Huobi would be laying off 20% of its staff. Justin Sun, Tron’s founder, has a majority stake at Huobi and is a member of the Huobi advisory board.
Justin Sun’s USDD is still depegged
The USDD stablecoin has a market cap of $708 million, which is a significant drop in the last two weeks. The algorithmic stablecoin was launched in May, with Sun saying that it would be over-collateralized to avoid a similar situation like what happened with Terra’s UST.
For the most part of 2022, USDD maintained its peg, but it depegged on several occasions. The peg has been lost once more, and there is widespread market fear that the algorithmic stablecoin could collapse in a similar manner to UST. In the last 24 hours, data from CoinMarketCap shows that the stablecoin’s trading volumes are up by 65%.
USDD is one of the smallest stablecoins in the market by market capitalization. Tether (USDT) and USD Coin (USDC) are some of the largest stablecoins with a market cap of $66 billion and $44 billion respectively. As an algorithmic stablecoin, the peg of USDD is maintained by trading incentives and the collateralized storage of cryptocurrencies. However, this algorithm can fail, which is what happened with Terra’s UST.
USDD depegs amid Huobi layoff plans
One of the main concerns surrounding the ability of USDD to maintain its peg is the solvency of the Huobi exchange. 2022 saw several exchanges go under because of the intense bear market. The market is now closely watching Huobi to determine whether the exchange has the financial muscle to sustain activities as the bear market intensifies.
Last week, reports started circulating about Huobi’s plans to lay off 20% of its staff. The layoffs were confirmed by Sun, which raised concerns about the exchange’s financial situation. The layoffs came a few months after Huobi unveiled a major rebranding campaign.
The reduced confidence in exchanges saw Huobi record a notable rise in withdrawals on Friday as soon as the news of the layoffs was confirmed. On Friday, the Singapore-based exchange recorded over $60 million worth of crypto withdrawals. However, this activity has significantly cooled down as Sun jumped to the rescue.
Sun deposited $100 million worth of stablecoins to the Huobi exchange to boost the confidence of users. The $100 million deposit was comprised of USDT and USDC. Shortly after the deposit was made, the pace of withdrawals cooled off. Sun has also urged the community to “ignore FUD and keel building.”
Nevertheless, the show of confidence about Huobi’s financial situation has not aided in the recovery of USDD. The stablecoin’s failure to recover also paints a contrasting image between USDD and the broader cryptocurrency market which has registered a 3.3% increase in the total market capitalization.
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