A prominent stablecoin depegged from the US dollar Wednesday morning after it was alleged that its Hong Kong-based issuer was bankrupt

In a new thread on the social media platform X, crypto billionaire and Tron (TRX) founder Justin Sun urged his followers to “take immediate action” to protect any assets they held in FDUSD, a stablecoin managed by First Digital Trust (FDT).

Sun also called for regulators to step in and take action to prevent further losses and save Hong Kong’s reputation as a financial power.

“First Digital Trust (FDT) is effectively insolvent and unable to fulfill client fund redemptions. I strongly recommend that users take immediate action to secure their assets.

There are significant loopholes in both the trust licensing process in Hong Kong and the internal risk management of its financial system.

I urge regulators and law enforcement to take swift action to address these issues and prevent further major losses. Hong Kong’s reputation as a global financial center is at stake, and similar financial fraud incidents must never happen again.”

FDUSD dipped to about $0.949 earlier in the day but has since recovered and is trading for $0.982 at time of writing, a decrease of 1.27% during the last 24 hours.

In response, the FDUSD has denied Sun’s claims and will pursue legal action to defend its reputation.

“The recent allegations by Justin Sun against First Digital Trust are completely false.

This dispute is with TUSD and not with FDUSD. First Digital is completely solvent.

Every dollar backing FDUSD is completely, secure, safe and accounted for with US-backed T-Bills. The exact ISIN numbers of all of the reserves of FDUSD are set out in our attestation report and clearly accounted for.

This is a typical Justin Sun smear campaign to try to attack a competitor to his business. As we told the reporter at CoinDesk, we have not yet had the opportunity to defend ourselves and instead of letting the TUSD matter be dealt with in court, Justin has instead resorted to a coordinated social media effort to try to damage FDUSD as a business competitor.

FDT will pursue legal action to protect its rights and reputation.”

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Shares of Coinbase (COIN), the largest crypto exchange in the US, have faced significant declines during the first quarter (Q1) of the year, primarily due to escalating concerns about the US economy and its impact on digital assets. 

Coinbase And Others Face Increased Volatility

According to Bloomberg, Coinbase’s stock has dropped more than 30% since the beginning of the quarter, marking its worst performance since the collapse of the FTX exchange in late 2022. 

This decline is reflective of a broader trend affecting nearly all major crypto-linked stocks, including companies like Galaxy Digital Holdings (GLXY.TO), Riot Platforms (RIOT), and Core Scientific (CORZ).

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The cryptocurrency market itself is experiencing turmoil, with Bitcoin (BTC) falling over 20% from its all-time high and Ethereum (ETH) plummeting more than 45% in value. 

These shifts come amid President Donald Trump’s escalation of a “global trade war,” which has stirred fears about the health of the country’s economy. Economic data has exacerbated these concerns, pushing the S&P 500 Index (GSPC) toward its worst quarter since mid-2022. 

Oppenheimer analyst Owen Lau noted that many within the cryptocurrency community recognize that the current market conditions are not primarily driven by fundamental factors. Instead, Lau emphasized that macroeconomic issues—such as tariffs and the potential trade war—are influencing investor sentiment significantly. 

The looming threat of a recession has reportedly added to the unease, causing higher-risk crypto-linked stocks to be even more volatile than Bitcoin itself. 

Lau explains that investments in companies like Coinbase carry additional risks, including the potential for bankruptcy, allegedly making them particularly susceptible to swift sell-offs.

Cryptocurrency Market Struggles To Rebound

The current state of the cryptocurrency market is a stark contrast to the optimism that prevailed at the start of the year, following Trump’s election. Bitcoin reached a record high of over $109,000 on Inauguration Day. 

Earlier this month, Bitcoin prices fell after Trump announced a strategic reserve for the market’s leading crypto, but did not allocate taxpayer funds to expand it. As of now, Bitcoin trades around $83,000, still above pre-election levels but far from its peak.

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While shares of various crypto-related companies surged following the election, Coinbase and crypto miners have since relinquished those gains. Notably, Michael Saylor’s Strategy (MSTR) is among the few stocks in the sector that has managed to remain in positive territory since November 5.

Despite the downturn, the cryptocurrency industry continues to gain influence in Washington and is moving closer to integration with traditional financial systems. However, this growing power has yet to translate into a market rebound. 

Connor Loewen, a cryptocurrency analyst at 3iQ, expressed skepticism about the current state of investor sentiment, stating, “What we saw a couple of months ago, I don’t know how much crazier it can get than that. I think we’re going to have to be looking for new catalysts.”

Featured image from DALL-E, chart from TradingView.com 

The head of research of market intelligence firm Fundstrat says that the odds of a V-shaped recovery for the stock market in April are overwhelmingly high.

In a new interview with CNBC Television, Tom Lee says that based on historical patterns, the stock market could mount a recovery in early April.

“The spike in the VIX (volatility index) or the collapse in investor sentiment or consumer confidence, that all happened around February 2018, so really that coincided with the first low that was made in 2018, and the market began to stage its recovery…

But as we start to think about the second half of this year, first of all, we’ve already had the collapse in sentiment. We’ve seen $850 billion of cash raised over the past year in money market balances, and then in the second half, we were looking for tax reform, which really propelled stocks in 2017.”

According to Lee, much of the panic in the stock market has already taken place this year, leading him to believe that stocks should start regaining their bullish momentum this week.

“So I think that the odds of a V-shaped recovery in stocks that come after April 2nd is just extremely high, because we’ve already sequenced a lot of the panic that people saw in 2018. I think it’s already taking place.”

A V-shaped rally is a technical pattern indicating an abrupt bullish reversal and a sharp surge in the market.

Earlier this month, both the stock and crypto markets took a hard hit after President Donald Trump announced tariffs and refused to rule out an upcoming economic recession.

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Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any losses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.

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