Casey Wagner

As stablecoin USDD continues to trade below its peg, Justin Sun’s Huobi Global is suffering the consequences.&nbsp;



The crypto exchange has lost 18% of its market share volume since 2020 and faces an “uphill challenge” to claw it back, according to <a href="https://marketing.kaiko.com/huobi-market-share-plummets-in-2022?ecid=AOKeC1bT368fiSsbn0gy6c0fbLHnD37-FKuzd0GB-S_g3dV_UjT75qNkijnRcupqoObDf8sZzeDl&amp;utm_campaign=Research%20newsletter&amp;utm_medium=email&amp;_hsmi=67605844&amp;_hsenc=p2ANqtz-8SeydFj-Lg3OgST_EZvzcCm-jNdvhg1exXW2Uu-nYUyPMLxbf0zMDteIzWQ6KJGy1FII45P16kz8zd-zVySaZrAgUxKg2G49ZdbzhCP7nO2IaKMv0&amp;utm_content=67605844&amp;utm_source=hs_email" target="_blank" rel="noreferrer noopener">research</a> from data provider Kaiko on Monday. By the end of 2022, Huobi represented 4% of the overall exchange market, down from 22% in 2020. 



Stablecoin USDD is issued by the TRON DAO Reserve, which stabilizes exchange rates for stablecoins issued on the TRON blockchain, founded by Sun.&nbsp;



Sun’s latest woes began when USDD failed to regain its peg after FTX’s collapse. It has remained below $1 since. By publication, USDD was trading around $0.98.



Huobi customers pulled over $100 million from the platform last week as solvency concerns mounted. Sun, who is Huobi’s majority <a href="https://blockworks.co/news/huobi-founder-sells-100-stake-to-justin-sun-fund-report" target="_blank" rel="noreferrer noopener">shareholder</a>, in turn moved $100 million of USDC and USDT from Binance to Huobi.&nbsp;



Though <a href="https://blockworks.co/news/huobi-stablecoin-plunges-70-as-justin-sun-readies-tron-replacement" target="_blank" rel="noreferrer noopener">USDD</a> could “still regain its peg,” according to Kaiko analysts, Sun’s exchange has gone down as “undoubtedly the biggest loser of the crypto bear market.”



USDD — which issuers <a href="https://usdd.io/?utm_campaign=Research%20newsletter&amp;utm_source=hs_email&amp;utm_medium=email&amp;utm_content=67605844&amp;_hsenc=p2ANqtz-9hhDIJvgHvH5UeIscgpCjkz1a8AhVMPUMj6Vq8KDcXh2s1VzRuwCZfX1zTOICkg4n77A7ZIX6BR0tXHpKHljevBlmYCO5Dx9eUmuxvGLy86G56DTs#/" target="_blank" rel="noreferrer noopener">claim</a> is backed with a collateral ratio of more than 200% in combination of TRON’s native TRX, bitcoin, USDC and USDT — has faced significant headwinds, Kaiko said.&nbsp;



“When looking at USDD-USDT order books, which is the highest volume trading pair, we can observe that market depth on the bid and ask side has been persistently imbalanced since early December,” analysts wrote. “The ratio of bids to asks (total volume of bids divided by volume of asks) was below 1 for most of the past month, which suggests heavy selling pressure is keeping the price down.”



Earlier this month, Huobi moved to lay off 20% of its staff in response to the continued selloff in cryptoassets.



Binance, which suffered its own crisis of confidence in December, when customers pulled $6 billion off the exchange, remains the top platform by market share. Of centralized exchanges, Binance holds 80% of market share relative to 11 other centralized platforms, including Coinbase and Kraken.&nbsp;



“Overall, the market has consolidated significantly with Binance dominating the majority of trade volume relative to both centralized and decentralized exchanges,” Kaiko analysts wrote.



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Justin Sun’s Woes Continue as USDD Depeg Sparks Huobi Concerns

Shalini Nagarajan

<div id="highlights-block_635f9dc3a54ad" class="highlights">
 <ul>
 <li>Justin Sun, who now plays a key role at Huobi, plans to replace HUSD with his own USDD</li>
 <li>HUSD&#8217;s recent plunge likely marks the end for the crypto exchange&#8217;s native stablecoin</li>
 </ul>
 
</div>



The swansong for Huobi Global&#8217;s dollar-pegged stablecoin is now playing out. HUSD fell to a low of <a href="https://www.coingecko.com/en/coins/husd" target="_blank" rel="noreferrer noopener">28 cents</a> this morning, four days after the crypto exchange <a href="https://www.huobi.com/support/en-us/detail/104921194018990" target="_blank" rel="noreferrer noopener">announced</a> it would delist the token.



Huobi, one of the largest crypto exchanges in the space, was recently <a href="https://cms.blockworks.co/huobi-founder-sells-100-stake-to-justin-sun-fund-report/" target="_blank" rel="noreferrer noopener">snapped up</a> by a Hong Kong-based asset management firm About Capital, which is <a href="https://cms.blockworks.co/huobi-founder-sells-100-stake-to-justin-sun-fund-report/" target="_blank" rel="noreferrer noopener">reportedly</a> spearheaded by Justin Sun. 



While Sun has denied being in charge of About Capital (as he initially did when he <a href="https://www.coindesk.com/markets/2019/11/12/despite-denials-tron-founder-confirms-investment-in-poloniex-crypto-exchange/" target="_blank" rel="noreferrer noopener">acquired</a> Poloniex), the controversial crypto entrepreneur is an official Huobi advisor following the deal. Sun told <a href="https://www.coindesk.com/video/justin-sun-usdd-to-be-one-of-the-settlement-stablecoins-on-huobi/" target="_blank" rel="noreferrer noopener">CoinDesk</a> earlier this month that Huobi would “probably list all the cryptocurrency against USDD,” a Tron-based stablecoin.



Huobi recently said all users&#8217; <a href="https://www.blockworksresearch.com/assets/husd" target="_blank" rel="noreferrer noopener">HUSD</a> would be converted to Tether (USDT) at a 1-to-1 ratio.&nbsp;The stablecoin was launched in September 2019, with its market capitalization briefly peaking at $1 billion in May 2021.



However, HUSD since failed to capture significant market share, hovering as low as $80 million last month. HUSD no longer features on Huobi but the token continues to trade on decentralized exchanges, with MDEX <a href="https://www.coingecko.com/en/coins/husd#markets" target="_blank" rel="noreferrer noopener">contributing</a> nearly 90% of the daily trade volume.



All this while Huobi may be undergoing a complete overhaul of its teams. China-based journalist Colin Wu <a href="https://twitter.com/WuBlockchain/status/1586308521418555392" target="_blank" rel="noreferrer noopener">reported</a> on Saturday that Sun’s TRON team appears to have taken charge of key divisions at the crypto trading firm, and Huobi’s current strength of 1,600 may be downsized as Sun believes there are too many employees.



In a <a href="https://twitter.com/justinsuntron/status/1586954207059329024" target="_blank" rel="noreferrer noopener">tweet</a> on Monday, Sun said his team was “extremely cautious” about the company’s future staff arrangements.&nbsp;Huobi didn’t return Blockworks’ request for comment by press time.



Huobi indeed appears to be in flux, but stablecoins have faced several headwinds over the last few months, including increased regulatory focus and changes in market perception from recent high-profile incidents like the collapse of Terra.&nbsp;&nbsp;



NEAR protocol recently <a href="https://cms.blockworks.co/near-nixes-algorithmic-stablecoin-usn/" target="_blank" rel="noreferrer noopener">shelved</a> its own algorithmic stablecoin USN to avoid another Terra-like situation.



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Huobi Stablecoin Plunges 70% as Justin Sun Readies Tron Replacement

<div id="highlights-block_62cc874c12cc5" class="highlights">
 <ul>
 <li>Justin Sun says he can step in to support struggling crypto firms as the liquidity crunch continues</li>
 <li>In mid-June, just months after its launch, algorithmic stablecoin USDD fell as low as $0.93 and has yet to recover to over $1</li>
 </ul>
 
</div>



Justin Sun, founder of the major blockchain network Tron, said he&#8217;s ready to join FTX CEO Sam Bankman-Fried in offering financial support to companies in the digital asset space that are struggling amid ongoing market volatility.&nbsp;



In a Tweet earlier this month, Sun said that he and the Tron protocol are “ready to serve.”&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">We are friends with everyone and are always ready to serve. <a href="https://t.co/WBXwG5GDqL">https://t.co/WBXwG5GDqL</a>&mdash; H.E. Justin Sun 🅣🌞🇬🇩 (@justinsuntron) <a href="https://twitter.com/justinsuntron/status/1545369541269921792?ref_src=twsrc%5Etfw">July 8, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Sun said he could spend up to $5 billion on acquisitions, according to a report from The Block, but as Tron’s algorithmic stablecoin USDD struggles to recover from a recent depegging, one analyst questions Sun’s resources.



“I don&#8217;t think he&#8217;s saying he&#8217;s got this capital for the good of the industry, rather, I think it&#8217;s for publicity about how strong the foundation is at Tron,” Marcus Sotiriou, analyst at digital asset broker GlobalBlock, said. “When it actually comes down to it, I don&#8217;t think they would actually be able to use $5 billion.”&nbsp;



In mid-June, just months after its launch, USDD fell as low as $0.93 and has yet to recover to over $1.&nbsp;



The Tron DAO withdrew 2 billion TRX, Tron’s native token, to protect the USDD peg on June 13. On June 17, the DAO withdrew an additional 3 billion TRX to defend the peg. Withdrawing TRX is part of a broader strategy to limit liquidity for traders shorting TRX and prevent a collapse.



TRX was intended to eventually be used to redeem USDD, similar to the relationship between LUNA and UST, but the <a href="https://usdd.io/USDD-en.pdf" target="_blank" rel="noreferrer noopener">latest version</a> of the stablecoin white paper abandons any algorithmic stability mechanism in favor of an overcollateralized model relying entirely on arbitrage incentives on external markets.



According to Tron’s <a href="https://tdr.org/#/" target="_blank" rel="noreferrer noopener">website</a>, its DAO has $2.3 billion in reserves — if the protocol uses a significant amount of reserves to bail out other members of the industry, USDD’s stability could be further threatened, Sortiriou said.&nbsp;



“If Tron’s stablecoin was to be in jeopardy…it would have huge implications as it&#8217;s now grown into quite a significant size, but I don&#8217;t think it would be that catastrophic because we&#8217;ve already had the collapse of Luna and UST, which was a combined value of $100 billion,” Sotiriou said. “It&#8217;s apparent now how algorithm stablecoins can&#8217;t be fully trusted.”&nbsp;



Sun’s offer comes as Bankman-Fried continues to dish out cash to help struggling sectors of the crypto industry as the aftermath of the collapse of Three Arrows Capital and Celsius’ insolvency struggles.&nbsp;



FTX agreed to <a href="https://cms.blockworks.co/bankman-fried-belies-bear-bids-for-bitvo/" target="_blank" rel="noreferrer noopener">acquire Bitvo</a> and <a href="https://www.prnewswire.com/news-releases/ftx-us-acquires-clearing-firm-embed-to-enhance-ftx-stocks-301572039.html" target="_blank" rel="noreferrer noopener">Embed Financial</a>, and the exchange extended a <a href="https://cms.blockworks.co/blockfi-inks-250m-credit-deal-with-ftx-to-ease-liquidity-fears/" target="_blank" rel="noreferrer noopener">$250 million credit line</a> to BlockFi. Alameda Research, founded by Bankman-Fried, <a href="https://cms.blockworks.co/voyager-to-borrow-500m-from-alameda-amid-insolvency-rumors/" target="_blank" rel="noreferrer noopener">loaned $500 million</a> to Voyager.



Reports suggest FTX also aims to <a href="https://cms.blockworks.co/ftx-denies-claims-to-acquire-robinhood/" target="_blank" rel="noreferrer noopener">acquire Robinhood</a>, although Bankman-Fried, who personally acquired a <a href="https://cms.blockworks.co/ftxs-sam-bankman-fried-spots-opportunity-in-troubled-markets/" target="_blank" rel="noreferrer noopener">7.6% stake</a> in the investing app in May, has denied these claims.



Sun did not immediately respond to Blockworks’ request for comment.



Correction, July 12, 2022 at 8:26 am ET: USDD does not use an algorithmic stability mechanism like TerraUSD did.



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