In an unexpected turn of events, Mishaboar, prominent developer and advocate of Dogecoin, issued an urgent call for the community to withdraw its DOGE holdings from Huobi amid escalating concerns of the exchange's insolvency. Addressing doubts about Huobi's reserves, the contributor cautioned that the widely touted proof-of-reserves concept, often used by exchanges as a display of financial health, can be misleading and fail to reflect the true liabilities of an exchange.
What about Huobi?
The alarm bells were initially amplified by crypto enthusiast Adam Cochran, who pieced together a trail of unsettling clues hinting at Huobi's dire financial situation. His detailed analysis indicated substantial sell-offs of USDT by Huobi, coupled with odd balance shifts, shortly after the controversial launch of stUSDT by Tron's Justin Sun. Questions arose about the legitimacy of the new stablecoin, as data suggested a disproportionate distribution of tokens, mostly held by Sun and Huobi themselves.
1/16— Adam Cochran (adamscochran.eth) (@adamscochran) August 5, 2023
So why is Tether selling off?
Likely Huobi insolvency.
-Binance started selling off USDT in bulk.
-We found out that Huobi execs (and Tron personnel questioned by police)
-This is not long after Sun's stUSDT launch
-And weird balance shifts at Huobi in the last month pic.twitter.com/f3HViYS93a
The implications of Huobi's potential insolvency extend beyond the realms of Tether alone. Allegations have surfaced that Sun's DeFi ventures, including JustLend, were seemingly fueled by diverted user funds from Huobi. Cochran went on to reveal a stark discrepancy between Huobi's reported wallet balances and the actual assets held, casting shadows of doubt over the exchange's credibility.
As for now, the situation remains unclear, with market participants awaiting further developments. In the wake of these revelations, the once-trusted reputation of Huobi now faces a severe credibility crisis, underscoring the critical importance of due diligence and cautious decision-making. Nevertheless, in situations of uncertainty, there can hardly be anything better than the old rule: not your keys, not your crypto.