Huobi Briefly Depegged From The U.S. Dollars As Liquidity Mounts
Liquidity issues among crypto exchanges keep rising as the market continues to experience a downward spiral. Huobi is the latest platform to decouple from the USD after its stablecoin lost its peg.
The stablecoin, HUSD, slumped briefly to $0.87 before the downtrend was resolved. However, the token has now been pegged back to the USD value.As of press time, the token is trading at $0.996, an 11% increase from the previous day.
How Has HUSD Lost its Dollar Peg?
A statement from the network shows that the issue arose after the company decided to shut down some accounts. The affected accounts include a market maker account to comply with regulations. According to HUSD, the time difference in the banking hour was the main factor for the drop.
Furthermore, the decision to shut down certain accounts in some regions is due to regulatory guidelines. But the time difference in banking hours resulted in the recent liquidity problem.
Meanwhile, the crypto exchange made a swift response in reaction to the liquidity drop. The firm also revealed that it is in touch with the relevant authorities and other industry players to address the setback.
The Ethereum-based Stable Universal Limited, the issuer of the HUSD stablecoins, revealed that it is aware of the recent liquidity crisis. The platform added that it is working on addressing the liquidity problem facing HUSD.
Huobi is a customer-centric crypto service provider and will ensure users’ assets are secured. The exchange noted that it is working with the issuer of HUSD to find a lasting solution and restore stability.
Is Crypto Facing a Liquidity Crisis?
The digital asset industry is in a rough patch, going through a market bloodbath. The liquidity crunch facing the ecosystem strikes fears in some users’ minds.
Moreover, the massive crypto sell-offs in May and June point to the rout hovering over the market. Many halted transactions and drawdowns occurred, with even the largest crypto exchanges affected. The collapse of the Terra LUNA ecosystem has laid bare the industry’s volatility.
According to CoinMarketCap, the industry has lost almost two-thirds of its market value since November 2021. Tens of billions of dollars in crypto wealth have been wiped out by the market correction.
The rising inflation in the parallel market has plunged the crypto industry into a liquidity crisis. There has been a period of low consumer sentiment concerning crypto assets as prices further fluctuate.
As a high-risk asset, cryptocurrency is prone to speculation, and speculation is not wrong. However, some assets have little to no use cases due to market speculation. Crypto assets are volatile and should be left to speculation. And this has been the case for critics to hold on to their views.
Since the dawn of the pandemic in 2020, the world’s economy has not been the same. Experienced traders and investors are confident of a reversal as they see the crypto winter as just a phase.
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