Huobi Insolvency Rumors Spread as Exchange Loses Over Half a Billion - Is it True?

Huobi exchange's Total Value Locked (TVL) dropped $600 million in July, which created market speculations over the weekend. However, all exchanges experienced shrinking reserves.

Source: Donanım Haber Elektronik Yayıncılık Ltd.

BEIJING - Leading exchange Huobi's TVL dropped to $2.4 billion from $3 billion in July. The amount of continuing withdrawals had the community questioning Huobi's financial health. While the community argues that Huobi is going insolvent, local news sources spread rumors that several Huobi executives were taken into custody in China.

Huobi insolvency leads to a shrinking USDT balance

Crypto Twitter analyst Adam Cochran was one of the names that fueled the insolvency speculations on Huobi. On August 6, Cochran Tweeted that the market was seeing Tether (USDT) sell-offs at a grand scale, and the reason behind it was probably Huobi insolvency.

He supported his argument by stating that there had been "weird balance shifts at Huobi" during July. He said:

"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 were questioned by police)

-This is not long after Sun's stUSDT launch

-And weird balance shifts at Huobi in the last month."

Cochran shared a chart showing Huobi's USDT balance and said that the rapid USDT sell-off on August 4 is likely to be after "Huobi employees would have been questioned."

USDT reserves shrink everywhere except Binance

On the other hand, some community members pointed out that all major exchanges except Binance have been recording USDT withdrawals recently at a similar rate as Huobi. Therefore, the community speculated that the concerns about Huobi might be a part of a broader market trend.

However, Binance stands to be an irregularity in this picture. While all other exchanges recorded USDT outflows, Binance has been recording an increase over the past month. Even though this is not enough to assume the overall market is safe, it definitely implies that Binance's market strategy is gradually different than all the other major exchanges.