Analyst Adam Cochran is fueling speculation about the financial soundness of cryptocurrency exchange Huobi by speculating that the company may also go bankrupt due to discrepancies in its Tether (USDT) holdings.
Cochran’s analysis of Huobi’s “Merkle Tree Audit” reveals that just $90 million is kept in Huobi’s accounts, despite the fact that the market’s users believe they own $631 million worth of USDT. Because the Merkle Tree Audit stopped updating last month, the mismatch is concerning.
According to Cochran, Justin Solar, a prominent figure in the cryptocurrency field and the creator of the Tron community, may also be responsible for the decline in Huobi’s USDT holdings.
Solar is accused of exaggerating the yield to encourage more deposits into Huobi by using Huobi customers’ property to support his decentralized finance (DeFi) operations.
Additionally, Cochran claims that Solar has converted customer Ethereum (ETH) holdings into stETH, with about half of the total 141,000 ETH claimed to be owned by Huobi users really current in Solar’s wallets.
Furthermore, he suggests that fellow cryptocurrency exchange Binance may advertise its Tether in large quantities as a tactical move against Huobi.
The analyst claims that Binance is attempting to lessen USDT’s hegemony by offering a variety of stablecoins that it will control and profit from. Cochran adds that another factor is that Binance might focus on Solar’s over-promised USDT holdings and objectives to protect itself from a potential mass sell-off by Huobi consumers.
He emphasizes that the financial obligations of the Bitcoin transaction appear to be out of balance. Even considering the money Solar is said to have transferred from Huobi to his DeFi apps, it is clear that only around half of Huobi’s total liabilities are covered. Solar is charged by Cochran of treating Huobi like a “private piggy financial institution.”
Cochran suggests that since Binance has learned of an investigation into Huobi and Tron employees, its aggressive USDT sell-off may be a risk mitigation strategy. These claims cast a worrisome light on Huobi’s financial situation and fuel speculation about the company’s potential insolvency.
