USDH Price Stability

How can USDH fall below peg?

The demand for USDH dictates its price. When many users or one large transaction swaps out of USDH for other tokens, this puts downward pressure on USDH's price, and it can dip below $1.
Here’s a comprehensive explanation in our USDH doc.

How can USDH climb above peg?

Demand dictates price. When USDH is heavily bought on the market (demand increases) the price of USDH can climb above $1.

How can USDH return to peg?

There are multiple ways USDH can return to peg.
The price action of USDH presents arbitrage opportunities. This plays a big part in USDH peg stability.
When USDH is expensive, users can mint USDH and swap it for other tokens for a profit, since $1 of SOL can mint 1 USDH worth $1.02, for example. When users swap expensive USDH for other tokens, this increases the amount of USDH on the market, and it drives down the price.
When USDH is cheap, users can buy it from the market to repay their loans. This reduces USDH on the market and increases its price back to $1.

How does Hubble defend USDH's peg?

Hubble has incentivized participation in several stableswap liquidity pools, and increasing the liquidity of USDH reduces the effects of short-term market forces on its price.
The Stability Vault has an added benefit of reducing users' need to acquire USDH from the market. When users want to repay their loans, they can withdraw USDH from the Stability Vault instead of affecting USDH's price on the market.
Soon, Hubble will launch a Peg Stability Module (PSM) that lets users mint or redeem USDH with and for another stablecoin for zero fees. This creates a risk-free arbitrage opportunity that invites user cooperation in maintaining USDH's peg for profit.
Hubble will also introduce a stability fee that will incentivize users to repay their loans, which can help reduce USDH on the market when necessary.

Has USDH ever de-pegged?

USDH has never experienced a serious de-pegging event. During the earliest days of the protocol, when there was little USDH liquidity, the trading price of USDH was above peg by a few cents at one point. USDH has since held a tighter peg, and it remained pegged during the May 2022 crash despite many users repaying their loans.