The big redistribution of the stablecoin market: Huobi is leaving, FTX is arriving

The world’s second-largest crypto exchange, FTX, is in search of a partner to issue its own stablecoin pegged to the value of the dollar. According to CEO and founder Sam Bankman-Fried (SBF), the announcement of a new stablecoin is attracting more and more interest from investors. In this article, we not only gather all the information on the new stablecoin from FTX but also analyze what’s going on in the stablecoin market in general.

FTX Super Stablecoin

FTX executives have so far refused to disclose details of a future ecosystem with an embedded stablecoin. SBF also said that they are in talks with an unnamed “strong player” with whom they will try to make a major new stablecoin.

.@FTX_Official is working on a stablecoin, according to @SBF_FTX who was interviewed by @TheBigWhale_. Reporting by @oknightcrypto.https://t.co/KYppZRuLeA

— CoinDesk (@CoinDesk) October 27, 2022

Analysts were primarily interested in the tokenomics of the project, in particular the fact that the stablecoin could be linked to the service crypto token FTT.

The fact is that a number of projects have used their own digital assets as collateral to issue stable dollar tokens. In Terra’s case, this led to the devaluation of the service cryptocurrency LUNA and the UST crash. In the collapse, investors lost more than $30 billion invested in this algorithmic stablecoin, which undermined confidence in all types of fiat-backed tokens. Even the most popular and largest asset, Tether USD (USDT), was temporarily disrupted.

Minus one player on the market

Against the background of the spring collapse of Terra, the stablecoin HUSD, issued by the cryptocurrency exchange Huobi, sank to the level of 0.92. Recently, the new owners of this exchange, who bought a 50% stake from the departed founder of the business, decided to abandon the HUSD token because it creates too many risks.

I'm very confident the FTX stablecoin will be a white label of circle's USDC

– Circle is one of the oldest & biggest players
– Circle is feeling the BUSD heat
– FTX/Alameda's preferred stablecoin is USDC
– Circle has EUROC pic.twitter.com/GZwKY9Sjeb

— Kasper Vandeloock (@KasperLoock) October 28, 2022

HUSD will be removed from the Huobi listing, user balances will be forcibly converted to USDT one-to-one from today. Incidentally, this move has finally dispelled rumors about the acquisition of Huobi by Justin Sun.

The creator of the Tron ecosystem would not miss an opportunity to convert balances into his own algorithmic stablecoin USDD. Justin Sun completely copied the idea from UST but offered investors a higher percentage of the staking yield. But why did this one survive?

One of the main positive differences from the exploding UST was that the USDD issue was covered by real collateral from cryptocurrencies, several times the dollar value of the coins issued. UST, on the other hand, was only 10% covered by reserves, so Terra developers had nothing to stop the massive short attack launched against the ecosystem.

What are the conclusions?

In general, the CEO of FTX was very successful in describing the growth trend of stablecoins, predicting the beginning of the second great war for a place in this market. We can see that some players (like today’s example with HUSD) can’t stand the competition and voluntarily exit the game. Terra UST is an example of an emergency exit from the market, the unfortunate effects of which the industry is still experiencing to this day.

At the same time, giants are entering this market, trying to take a significant share, using their competitive advantages (such as having their own ecosystem or powerful partners). FTX and its soon-to-be-released stablecoin are a good example of such.