Experts told why the price of the stablecoin HUSD collapsed

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The stablecoin HUSD (HUSD), launched in 2018 by the Huobi Global cryptocurrency exchange, has lost its peg to the US dollar (its rate has deviated from $1). On August 18, it fell below $0.83, down 16%. The coin is currently trading at around $0.91, according to Coingecko.

HUSD is not the first stablecoin to lose its peg to the dollar this year. In early May, the same thing happened with UST, which led to the collapse of the altcoin Luna and the collapse of the Terra project. The token is currently worth $0.02. And in mid-June, the stablecoin USDD, issued by the Tron project, fell to $0.84. The company significantly increased the supply of the coin, as a result, its price recovered to $1.

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The experts told RBC-Crypto about the reasons that could cause the depreciation of HUSD, and about the current problems of stablecoins.

Token Issues

The main reasons for the deviation of the HUSD token from $1 were rumors about the desire of the founder of Huobi, Leon Li, to sell a controlling stake in the company, Roman Nekrasov, co-founder of the ENCRY Foundation, believes. According to him, market participants suggest that the founder of the exchange expects stagnation in the crypto market and tightening of crypto regulation.

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In addition, the expert noted that in early August, the stablecoin was delisted from the FTX exchange, which increased panic in the market. However, Nekrasov recalled that, unlike the UST that collapsed in May, the HUSD token was backed by very real reserves in bank accounts, and not by cryptocurrencies.

The expert also noted that the share of HUSD in the market is low, only about $150 million. This is an insignificant figure compared to the shares of leading stablecoins such as USDT and USDC, the specialist believes.

Nekrasov named another reason why investors could start selling the coin. There is evidence that part of the funds obtained by criminal means was laundered on centralized crypto exchanges, among which Huobi was noticed, the specialist says. He explained that this jeopardizes the inclusion in the sanctions lists of a number of addresses seen in laundering and simply links with “dirty coins”. And this can negatively affect the stablecoin itself, for example, causing a blockage of coins, as happened with 75 thousand USDC of the Circle company after blocking Tornado Cash addresses.

“There are no reasons for positive changes now”

Stablecoins are now losing their peg to the dollar, as the world is losing confidence in the stability of the dollar system, said Artem Deev, head of the analytical department at AMarkets. According to him, the problems in the American economy are growing: they predict a recession, which technically has already begun.

The expert noted that the dollar is relatively stable only due to the Fed’s rate hike. These actions of the regulator cause an influx of funds from investors, including European ones, Deev explained.

At the same time, countries around the world are reducing investments in dollars and US Treasury bonds, the analyst noted. He also drew attention to the fact that more and more transactions are made in national currencies and there are growing expectations that the dollar will lose its leadership in world trade.

Stablecoins, which were created as “protective” funds pegged to the US dollar, are experiencing problems because the dollar itself is gradually depreciating due to the global crisis, the largest since the Great Depression, the expert says.

Huobi exchange problems did not start today. Deev recalled that at the end of June, the exchange announced a staff cut of 30% due to the loss of the Chinese market and a decrease in income. Also, Huobi was forced to leave the Thai market, the analyst said. He suggested that HUSD would face the same fate as UST.

“There is no reason for positive changes in the stablecoin market now, since the most important coin, the dollar, is experiencing problems,” the expert concluded.

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Source: Cryptocurrency

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