As liquidity goes up, Huobi briefly broke away from the U.S. dollar

As liquidity goes up, Huobi briefly broke away from the U.S. dollar.

As the cryptocurrency market continues to slide, liquidity concerns among trading platforms have increased. Huobi’s stablecoin has lost its USD peg, making it the latest platform to uncouple from the US currency.

HUSD, a stable coin, fell to $0.87 for a short time before the downward trend was reversed. Token value has been reset to $1 USD. At the time of writing, the token was trading at $0.996, up 11% from the day before.

Why Did the HUSD Float Away from the Dollar?

According to a network statement, the problem started when the provider suspended some user accounts. A market maker account is one of the accounts that must change to meet regulatory requirements. HUSD claims that the shift was caused by a combination of factors, the primary one being a change in banking hours.

Also, local regulations have dictated the closure of some accounts. However, the current liquidity crisis was brought on by the disparity in banking hours.

While this was going on, the cryptocurrency exchange swiftly adjusted to the sudden decrease in liquidity. The company also stated that it is communicating with government agencies and other industry participants to find a solution to the problem.

HUSD stablecoins’ Ethereum-based issuer Stable Universal Limited has acknowledged understanding the current liquidity crunch. HUSD’s liquidity issue is something the platform is working on fixing.

Huobi values its customers highly, thus it will take every precaution to protect their cryptocurrency holdings. The issuer of HUSD has been informed of the exchange’s efforts to restore stability and find a long-term solution.

Is There a Liquidity Crisis in Cryptocurrency?

There has been a market slaughter in the digital asset industry recently. Many people are worried about the ecosystem’s liquidity crisis.

Massive crypto sell-offs in May and June also indicate a collapse is looming. Even the largest cryptocurrency exchanges had many blocked transactions and drawdowns. The Terra LUNA ecosystem failure exposed the vulnerability of the business world.

From November 2021, CoinMarketCap reports that the market value of the industry has dropped by around two-thirds. The market slump has wiped away tens of billions of dollars’ worth of cryptocurrency assets.

The cryptocurrency market is experiencing a severe liquidity problem as the parallel market’s inflation rate rises. As cryptocurrency prices continue to fluctuate, investor confidence has taken a hit.

Cryptocurrencies are a high-risk asset, therefore it’s natural for people to speculate on their value. Market speculation, however, has rendered some assets practically useless. Due to their high degree of volatility, crypto assets are best left to the realm of speculation. This is why skeptics have persisted in holding their original positions.

The global economy has not been the same since the start of the epidemic in 2020. Expert investors and traders believe the current crypto winter is only temporary.

Orizu Augustine
Orizu Augustine is an experienced crypto writer working for Alltechcraft. Having passion for writing, he covers news articles from blockchain to cryptocurrency and iPhone and Samsung related articles.