Stablecoin HUSD loses parity with dollar for 12 hours, Huobi comments on what happened

Huobi-launched crypto-dollar HUSD has seen an unusual price fluctuation for a stablecoin (stable currencyin free translation) and the broker commented on the case.

Like Tether (USDT) and USD Coin (USDC), HUSD is a token supposedly backed by dollar reserves, unlike algorithmic (like the failed TerraUSD) or over-collateralized (like DAI) stablecoins.

However, even so, the asset experienced problems and saw its price drop sharply to $0.84 on Thursday (18), before returning to its ideal price (around $1.00).

Is stablecoin not stable?

To understand a little more about how stablecoins work, it is important to know that some small volatility is expected as quotes are influenced by market forces. Big buys or huge sells can move the price a bit, but any change opens up an arbitrage opportunity to bring the price back on track at par with the dollar.

This is especially true when there is a possibility of redemption for physical dollars, as should be the case with collateralized stablecoins. Buying tokens for 80 cents, for example, and exchanging them for 1 dollar is an attractive business, but it requires trust in the stablecoin issuer, which in this case is Stable Universal Limited, as Huobi was keen to point out in communiqué public on Twitter.

Huobi comments on HUSD’s “de-peg”

HUSD is a stablecoin that was created on the Ethereum network and launched by the traditional exchange Huobi in 2018. In May of this year, following the collapse of TerraUSD (UST), the exchange’s research arm, Huobi Research, published a table assessing the risk. of every stablecoin on the market, rating HUSD as one of the safest, alongside USDT, USDC, DAI, LUSD and a few others.

A few months later, the asset went through “liquidity problems”, according to the company, but no further details were elaborated, beyond the timeline of the problem.

Second to Huobi, they noticed HUSD’s weird price fluctuations on Thursday morning (10:05 UTC) and took 5 minutes to contact broadcaster Stable Universe Limited, of which a Huobi spokesperson stated that the exchange no longer holds a stake in it since April.

Twenty minutes later, the two companies had identified the cause of the problem and it took just under 12 hours to completely fix it together. The company stated that it has always prioritized the security of users’ assets since its inception in 2013

At 22:00 (UTC), the problem was resolved and HUSD trading returns to normal.

HUSD recovered its peg within 12 hours.

We would like to reiterate: #Huobi has always prioritized the security of our users' assets since our inception in 2013.

— Huobi (@HuobiGlobal) August 19, 2022

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