Huobi $500M Crisis: Rumor to Possible Insolvency

Huobi $500M Crisis: Rumor to Possible Insolvency

Time Stamp: August 7, 2023 3:09 AM
Huobi $500M Crisis: Rumor to Possible Insolvency PlatoBlockchain Data Intelligence. Vertical Search. Ai.

Rumors can
act as a dangerous weapon, triggering panic and leading to capital flight. The
cryptocurrency exchange Huobi learned this the hard way, losing $500 million due
to gossip that its leadership had been arrested in China and that the platform
was on the verge of bankruptcy.

Initial
reports of Huobi’s troubles emerged on 4 August after the initial news that
representatives from the exchange had been arrested in China in relation to
investigations involving ties to gambling platforms. On Twitter, Huobi’s
spokesperson stated that rumors regarding the arrest of high-ranking exchange
representatives were false.

However, in
the meantime, there were also talks about the platform’s solvency issues, which
were reportedly related to the devaluation of the stablecoin Tether (USDT).

Analytical
data from DefiLlama confirmed that among the stablecoins USDT and USD Coin
(USDC), Huobi held less than $90 million in assets as of 5 August. According to
the exchange’s last audit, user accounts held $630 million in USDT alone. Thus,
Adam Cochran suggests that Huobi has significant solvency issues.

Current
data from DefiLlama show that Huobi’s wallets held just $72 million in USDT and
USDC. Simultaneously, the exchange’s total value locked (TVL) dropped by $500
million, from over $3 billion to $2.5 billion.

Huobi’s TVL. Source: DefiLlama

Huobi’s Ongoing Troubles

Even though
Huobi denies the rumors, the outflow of capital from the exchange is
undeniable. But these are not the platform’s only problems. In May, it had to
shut down its operations in Malaysia after the Securities Commission Malaysia
(SCM) intervention. The exchange had not registered as a local cryptocurrency
operator, which meant they operated illegally, leading to their website and
mobile apps being blocked in the country.

Earlier in
the year, Finance Magnates reported that the exchange was planning to
lay off about 20% of its workforce, aiming to maintain “a very lean
team” due to adverse changes in the industry and declines in
cryptocurrency asset valuations.

According
to the latest report by Bitget, the crypto space is currently dominated by Gen
Z investors. The study revealed that Gen Z users, who are typically tech-savvy
and influenced by social media, make up 44% of all copy traders on Bitget.

Rumors can
act as a dangerous weapon, triggering panic and leading to capital flight. The
cryptocurrency exchange Huobi learned this the hard way, losing $500 million due
to gossip that its leadership had been arrested in China and that the platform
was on the verge of bankruptcy.

Initial
reports of Huobi’s troubles emerged on 4 August after the initial news that
representatives from the exchange had been arrested in China in relation to
investigations involving ties to gambling platforms. On Twitter, Huobi’s
spokesperson stated that rumors regarding the arrest of high-ranking exchange
representatives were false.

However, in
the meantime, there were also talks about the platform’s solvency issues, which
were reportedly related to the devaluation of the stablecoin Tether (USDT).

Analytical
data from DefiLlama confirmed that among the stablecoins USDT and USD Coin
(USDC), Huobi held less than $90 million in assets as of 5 August. According to
the exchange’s last audit, user accounts held $630 million in USDT alone. Thus,
Adam Cochran suggests that Huobi has significant solvency issues.

Current
data from DefiLlama show that Huobi’s wallets held just $72 million in USDT and
USDC. Simultaneously, the exchange’s total value locked (TVL) dropped by $500
million, from over $3 billion to $2.5 billion.

Huobi’s TVL. Source: DefiLlama

Huobi’s Ongoing Troubles

Even though
Huobi denies the rumors, the outflow of capital from the exchange is
undeniable. But these are not the platform’s only problems. In May, it had to
shut down its operations in Malaysia after the Securities Commission Malaysia
(SCM) intervention. The exchange had not registered as a local cryptocurrency
operator, which meant they operated illegally, leading to their website and
mobile apps being blocked in the country.

Earlier in
the year, Finance Magnates reported that the exchange was planning to
lay off about 20% of its workforce, aiming to maintain “a very lean
team” due to adverse changes in the industry and declines in
cryptocurrency asset valuations.

According
to the latest report by Bitget, the crypto space is currently dominated by Gen
Z investors. The study revealed that Gen Z users, who are typically tech-savvy
and influenced by social media, make up 44% of all copy traders on Bitget.

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