In a flashback to the dark days of May, HUSD, a stablecoin with a $62M market cap, lost its peg to the U.S. dollar and was delisted from the Huobi exchange on Oct. 28.
The stablecoin slipped its peg and skidded to 33 cents from 99 cents.
Huobi, which was backed by Justin Sun, the founder of Tron, began delisting HUSD from its exchange on Oct. 10 when it removed 21 HUSD pairings from the platform.
On Oct. 28, Huobi terminated withdrawal and deposit services for the token. Huobi announced that all HUSD held on the exchange will be converted into USDT on a one-to-one basis before Nov. 4.
With users now unable to deposit HUSD on Huobi for conversion, the market lost confidence in HUSD’s price, with sellers offloading the token in a bid to recuperate whatever value they could from the open markets.
The delisting comes after Huobi announced on Oct. 8 that its founder, Leon Li, would sell his majority stake in the exchange to the Hong Kong-based investment firm, About Capital Management. Bloomberg News reported that Li was looking for a buyer in August.
HUSD, which had traded on Huobi for four years, peaked in May 2021 with a $1B market cap and has declined 80% since then.
Sun joined Huobi’s global advisory board amid the restructuring, but denied rumors claiming he is ABM’s “core investor.”
Huobi also launched support for USDD, Tron’s native stablecoin, in May. USDD is now the second most-traded stablecoin on Huobi after Tether, according to CoinGecko.
Stablecoin debegs have become a flashpoint for crypto risk ever since the Terra ecosystem cratered in May with $60B in crypto market cap losses. Roughly 200,000 South Koreans were believed to have invested in Terra’s UST stablecoin or Terra’s native LUNA token.
The incident undermined confidence in other algorithmic stablecoins, with many other stable tokens losing their pegs as holders rushed to offload their bags. HUSD’s peg also came under threat in August.
Terra’s collapse also exposed widespread systemic risk in the web3 sector, with the venture firm Three Arrows appearing to enter bankruptcy as a result of its exposure to Terra. The company was found to have taken out millions in unsecured loans, placing its creditors in jeopardy too.
Li founded Huobi in China in 2013. The exchange quickly amassed a major share of the Chinese crypto market by charging no transaction fees in its early months.
Beijing began clamping down on China’s domestic crypto markets in 2017, ordering local exchanges to stop facilitating trades between fiat currency and digital assets. Huobi finally ceased all Chinese activities in December 2021, removing CNY pairings and preventing Chinese users from depositing to and withdrawing from the platform.