Crypto exchange Huobi together with Stable Universal Limited restored liquidity of HUSD
According to CoinMarketCap, the Stable Universal-issued HUSD steblecoin fell to 92 cents on August 18, 8% below the 1:1 peg. Stablecoin’s liquidity problems were resolved by the early morning hours of August 19.
“Around 10 a.m. on August 18, Huobi Global detected abnormal fluctuations in HUSD price dynamics and trading volume. Shortly thereafter, our team contacted Stable Universal to determine the factors affecting the situation and discuss stabilization measures. Key details were clarified in less than 30 minutes,” Huobi representatives said.
The fall in the HUSD exchange rate, which at one point dropped nearly 15 percent below its peg to the dollar, also led to problems with stablcoin liquidity in the market.
What is HUSD and who is its issuer?
HUSD is a Stablecoin backed by a dollar reserve. HUSD is produced by Stable Universal and can be exchanged for U.S. dollars at a 1:1 ratio. Organizations have not seen such a strong deviation from the dollar peg since the launch of HUSD in 2018.
What were the problems associated with?
Exchange experts explained that the loss of parity was preceded by large sales of HUSD, which put pressure on the token price. Normally, the rebalancing of the peg should happen naturally. However, if an abnormally large number of stabelcoins are sold and the issuer freezes their redemption for fiat, rebalancing will be impossible.
Huobi representatives added that the reasons why Stable Universal froze HUSD redemption are not entirely clear. As explained in the company, part of the reason for the detachment can be explained by past events: about two weeks ago, FTX for unknown reasons removed HUSD from its base of dollar steblecoins. This meant that the Stablecoin would no longer be used to fund dollar balances and could not be used as collateral. This may have contributed to large HUSD sales, especially if institutions decided to convert their HUSD assets en masse to USDC or USDT.
How did the problem get fixed?
After working with Stable Universal, the liquidity problems were resolved by the morning of August 19. HUSD returned to a dollar peg with full resumption of payments.
“Throughout the incident, Huobi gave users the opportunity to freely convert HUSD into stable coins, such as USDT and USDC, or other tokens available on the platform,” the exchange team added.
Huobi representatives also noted that the platform’s specialists managed to minimize potential risks for users, and the exchange’s operation and trading volume remained stable throughout the incident.
