Crypto market analyst Adam Cochran also suggests that crypto exchange Binance might be selling a large amount of Tether strategically to counter Huobi.
During the last weekend on August 5-6, crypto exchange Huobi witnessed a staggering $64 million in outflows with the exchange’s total value locked (TVL) falling under $2.5 billion, down from $3.09 on July 6.
On August 4, there were rumors that the leaders of the exchange were arrested in China due to a suspected investigation into their involvement with gambling platforms. Other reports also suggest that some executives have been leaving Huobi over the past few weeks.
Analyst Adam Cochran recently raised concerns over the financial stability of the crypto exchange Huobi. He believes the firm might be insolvent due to differences in its Tether (USDT) holdings. Cochran found that while Huobi’s accounts show $90 million, its users believe they own $631 million worth of USDT.
This discrepancy is worrisome, especially since the Merkle Tree Audit stopped updating last month. Cochran suggests Justin Sun, a prominent figure in the crypto world, may be involved in using Huobi users’ assets to support his DeFi applications, potentially inflating the yield to attract more deposits into Huobi.
Cochran also claims that Sun converted user Ethereum (ETH) balances into stETH, but only around half of the total 141,000 ETH supposedly held by Huobi users can be found in Sun’s accounts.
Binance Selling USDT in a Move Against
Interestingly, Cochran also suggests that crypto exchange Binance might be selling a large amount of Tether strategically to counter Huobi.
According to Cochran, Binance aims to reduce the dominance of USDT by promoting stablecoins they can control and benefit from. Another reason is that Binance might be aware of Sun’s overstated USDT holdings and wants to protect itself from a potential mass sell-off by Huobi users.
He highlights that Huobi’s financial situation seems unbalanced, even with the funds Sun reportedly transferred to his DeFi apps. Only about half of Huobi’s total obligations appear to be covered. Cochran accuses Sun of treating Huobi like a personal bank.
Cochran suggests that Binance’s aggressive USDT sell-off could be a way to reduce risks, as there are allegations of an investigation into Huobi and Tron employees. These claims raise concerns about Huobi’s financial health and fuel the rumors of possible insolvency.
Justin Sun Rejects All the FUD
Huobi has come out openly stating that the crypto community shouldn’t pay attention to all the FUD and that the company’s operations are completely normal. “Reject FUD, don’t believe in rumors, don’t spread rumors, don’t spread rumors! Co-construct industry development” notes a Huobi post. Huobi chief Justin Sun also tweeted along similar lines.
— H.E. Justin Sun 孙宇晨 (@justinsuntron) August 7, 2023
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