Huobi Withdrawals Slows as Tron’s USDD Experiences Fresh Slip
Singapore-based crypto exchange, Huobi experienced a slower pace of withdrawals on January 8 though its stablecoin USDD’s prices slipped away from the $1 peg. The assessment by blockchain analytics Nansen indicated a subsiding pace of withdrawals following the $100 million deposit by its founder Justin Sun.
Huobi Withdrawal Rush Subsiding
Nansen’s analysis indicated that the $100 million deposit by the crypto mogul restored confidence in the crypto exchange hit with a bank run. Huobi witnessed heightened withdrawals following the revelation of downsizing its workforce by 20%. Panic gripped users who withdrew $60.9 million on Friday, January 7, speculating that the layoff signaled potential struggles.
The bank run prompted Sun, who owns the majority stake in the Singapore-based exchange, to deposit stablecoins valued at $100 million. The Friday deposit comprising USDC and USDT by the Tron founder sparked confidence as Nansen indicated a withdrawal rush lessening on Sunday.
Nansen data indicates that the withdrawals from the Huobi exchange eased up to $12 million by midday Sunday. With users reconsidering the withdrawal rush, weekly outflows declined from $94.2 million registered on Friday to $84 million.
Community yet to Regain Confidence in USDD
Despite Huobi users portraying increasing confidence in the exchange, Tron’s USDD price slipped away from the $1 peg. In particular, the USDD price in the past week hovered between $0.979 and $0.972. The USDD movement contradicts other stablecoins, including Tether (USDT) and USD Coin (USDC), that have maintained a steady price grip at the $1 peg.
The drift portrayed by USDD from the peg replicates the June 12, 2021 experience, where it lost its pegging following the Terra blockchain collapse. While it recovered on July 26, USDD is yet to recover fully since losing the $1 peg in October.
Stablecoins’ Segment Performance
Scrutiny of USDD performance in the last two weeks shows $6.5 million value erosion leaving it with a market capitalization of $709.2 million by 0545 UTC. Its capitalization is dwarfed by USDC’s $43.992 billion and USDT’s $ 66.275 billion market value. A likely driving factor in the contrasting performance of USDD’s unique design as an algorithmic stablecoin.
The Tron’s stablecoin relies on trading incentives and preference for users to collateralize their cryptos storage to maintain its $1 peg. The algorithmic stablecoins’ design attracted concerns in 2022 following the sudden decline in Terra’s UST and eroding $40 billion value.
Regained confidence in Huobi could save USDD from such a collapse. However, Nansen technician Andrew Thurman indicated that the stablecoin performance relies upon the people. Thurman dismissed the input of built-in stabilizers to allege instead that the community faith is the primary driver of the stablecoins peg.
Loss of confidence in the capability to redeem the stablecoin at a full dollar will prompt individuals to swap at the haircut rate. Thurman noted that such considerations would eventually drift the crypto asset away from the $1, as witnessed by the whales’ collective loss of faith in UST.
Editorial credit: Sergei Elagin / Shutterstock.com
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