Last Updated on 49 mins by cryptoevent

Stablecoins are cryptocurrencies that are free from the volatility of the broader market. However, the events of the last few months have shown that stablecoins are also vulnerable to price declines. Several stablecoins have lost their peg since the bear market intensified, with the Huobi stablecoin being the latest to lose its peg.

Huobi stablecoin (HUSD) is losing peg

Huobi stablecoin (HUSD) is set to maintain parity with the US dollar. It lost peg on Aug. 18, falling to around $0.82, according to data CoinGecko. However, by that time HUSD had recovered, trading at $0.99 and gaining 8.4% in the last 24 hours.

HUSD is a stablecoin issued by Hong Kong-based Stable Universal. It is an ERC-20 token created on the Ethereum blockchain. Its developers say it is a safe currency that combines the stability of the US dollar with the efficiency of blockchain technology.

As HUSD lost its peg, the stablecoin’s liquidity in the Curve 3 pool was affected. Curve is one of the top DeFi exchanges and issued a statement saying the exchange rate is too low for the stablecoin.

The depeg also followed the removal of HUSD from the list of supported USD-backed stablecoins by the FTX exchange. The reason for the deprecation is still unclear, but Huobi Global issued a statement saying it was aware of a liquidity issue with the token. It further said it would work with the HUSD issuer to find a solution to the issue and restore pegging.

The stablecoin issuer appears to have resolved the liquidity issues and the peg has been regained faster than expected. However, the events surrounding the Depeg are a mystery as HUSD has been backed by US dollars unlike the other stablecoins that have collapsed due to its algorithmic support.

Stablecoins are not that stable

As mentioned earlier, stablecoins stability has been tested during the ongoing bear market. Stablecoins are designed to protect investors from the volatility of the broader cryptocurrency market by offering efficiency and security.

However, in recent months, some stablecoins have proven to be even more volatile than other cryptocurrencies. Several stablecoins have lost their peg in the past month. The situation started with TerraUSD (UST) losing its peg in May and causing the collapse of the Terra Luna ecosystem.

Amid the crypto market turmoil in May, many stablecoins were tested and one of them was USDT issuing Tether. Tether briefly lost his pen but recovered shortly thereafter. At the time, USDT was also under pressure from FUD regarding reserve coverage of the stablecoins.

In June, Tron’s algorithmic stablecoin, USDD, also lost its peg, falling to $0.925. However, Tron used collateral to restore the bond. The pin was recovered a few weeks later.

The Acala stablecoin was the latest to be depegged after losing 99% of its value following a protocol hack. aUSD dropped below $0. However, the team voted to burn the tokens minted by the hacker. At the time of writing, aUSD has yet to reclaim its peg and is trading at $0.84.

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