As huobi cryptocurrency market continues its freefall, concerns about liquidity on the trading platforms that facilitate its buying and selling have increased. After its stablecoin lost its USD peg, Huobi is the latest platform to decouple from the US dollar.
The stablecoin HUSD fell briefly to $0.87 prior to the reversal of the downward trend. Nonetheless, the token is now pegged to the USD value. The token is currently trading at $0.996, an 11% increase from the previous day’s price.
How Has the HUSD’s Dollar Peg Been Lost?
According to a statement from the network, the problem arose after the company decided to close some accounts. Among the affected accounts is a market maker account for compliance purposes. According to HUSD, the primary cause of the decline was the difference in banking hours.
In addition, the decision to close certain accounts in some regions is a result of regulatory requirements. But the disparity in banking hours caused the recent liquidity crisis.
In the meantime, the cryptocurrency exchange swiftly responded to the drop in liquidity. In addition, the company disclosed that it is in communication with the relevant authorities and other industry participants to address the setback.
The HUSD stablecoins’ issuer, its Cryptocurrency Consistent Pervasive Ltd in, disclosed that it is aware of the current credit crunch. The device incorporated that it is working to address the HUSD’s liquidity issue.
Huobi is a customer-focused crypto service provider that will safeguard user assets. The exchange noted that it is working with the issuer of HUSD to find a lasting solution and restore stability.
Does Cryptocurrency Face a Liquidity Crisis?
The digital asset industry is currently experiencing a price catastrophe. A number of users are concerned about the environment’s liquidity shortage.
Moreover, the massive crypto sell-offs in May and June indicate that a market decline is imminent. Numerous halted transactions and drawdowns occurred, affecting even the largest cryptocurrency exchanges. The collapse of the Terra LUNA ecosystem has revealed the variability of the industry.
According to CoinMarketCap, the net worth of the industry has decreased by nearly two-thirds since November 2021. The market correction wiped out tens of billions of dollars worth of crypto assets
The crypto industry is experiencing a liquidity crisis as a result of the rising parallel market inflation. As prices continue to wax and wane, investor confidence regarding crypto assets has declined.
As a high-risk asset, cryptocurrency is susceptible to speculation, which is not incorrect. Due to market suppositions, however, a few assets have few to no use cases. Due to their volatility, crypto assets should be subject to speculation. And it has been this way for critics to maintain their opinions.
Since the outbreak of the global epidemic in 2020, the global economy has changed drastically. Experienced speculators and traders are optimistic about a reversal because they view the crypto winter as a temporary condition.