The outflow of funds from Huobi accounts was observed throughout last month, resulting in a $529 million decrease in total value locked (TVL) in July. But rumors about the arrest of Huobi executives and possible liquidity problems of the cryptocurrency exchange provoked the FUD effect and intensified the outflow.
Crypto exchange Huobi has been hit by the FUD effect again. According to DefiLlama, between August 3 and 6, inclusive, users withdrew $62.3 million from the platform’s accounts. The outflow of funds reduced the crypto exchange’s TVL to $2.5 billion. For comparison, this figure was at $3.09 billion on July 6.
The main reason for the FUD was the rumor that Huobi’s top management was arrested in China as part of an alleged investigation into the exchange’s ties to gambling platforms. A statement by analyst Adam Cochran that Huobi has serious liquidity problems added fuel to the fire.
Cochran noted in a series of tweets that the company is unable to meet its financial obligations due to inconsistencies in storing the Tether token (USDT). Citing on-chain analytics data, Cochran pointed out that Huobi’s reserves in USDT and USDC tokens are less than $90 million, although the latest audit showed that the company holds about $630 million in stablecoins in its exchange accounts. According to the analyst, the audit page hasn’t been updated in over a month and Huobi is in deep illiquidity.
Cochran also wrote that some of the exchange’s executives were questioned by law enforcement officials in the People’s Republic of China. This triggered rumors of their detention, despite the fact that Huobi officials publicly deny it. For example, the head of the company’s PR department said that the cryptocurrency exchange is “currently doing well.” However, no company representative has ever commented on the discrepancy between the on-chain data and the audit report. According to DefiLlama data, as of August 7, 14:00 (GMT+3), Huobi wallets hold USDT and USDC worth only $52 million.
It’s not the first time Huobi has been hit by the FUD effect. Previously, users have already arranged a massive outflow of funds from the platform due to structural problems in Huobi and weird behavior of Justin Sun, who was rumored to have bought the cryptocurrency exchange last year.
