​Analysts find more than 50% of low liquid assets on Huobi’s balance sheet

What’s new? A joint analysis by X-explore and WuBlockchain found that more than 50% of the assets (about $1,744 billion) of the Huobi crypto exchange are low liquid. For example, the value of the platform’s reserves on the Huobi ECO Chain (HECO) of $215 million is over-calculation, and TRX of $300 million are personal assets of Huobi CEO and TRON blockchain founder Justin Sun. Overall, assets worth $1,84 billion, or about 53% of the platform’s reserves, are at risk, the document says.

X-explore and WuBlockchain’s analysis

What else does the document say? Since the collapse of the FTX crypto exchange, 18 major trading platforms published reserve information to boost confidence in the industry. However, due to the massive cuts and information about unscrupulous traders, a wave of “fear, uncertainty and doubt” (FUD) about Huobi’s sustainability intensified.

On November 13, Huobi disclosed hot and cold wallet addresses with reserves. At the time, they totaled 32 000 BTC, 274 000 ETH, 820 million USDT, and 9,7 billion TRX worth $3,5 billion. At that time, to increase transparency, the company also committed to audit its proof of reserves within a month using the Merkle tree algorithm and a third-party firm, but by the end of January 2023, the results of the audit had still not been released.

The authors of the analysis also drew attention to the discrepancy in information regarding Huobi reserves in BETH (Ethereum on the Beacon Chain) assets. Thus, the address owned by the bridge on the HECO network owns 96 671 BETH. However, they are not reflected in the Etherscan service. In addition, the address holds only 22 278 ETH, not enough to cover the available BETH at a 1:1 ratio.

According to on-chain data, Binance owns 6,06 billion ETH and 108 million BETH with a staking ratio of 0,017. In turn, Huobi owns 151 million ETH and 128 million BETH with a staking ratio of 0,85. This means that most of Huobi’s ETH users are in staking. The difference in the ratios is almost 50 times, so the report’s authors suggested that Huobi privately embezzled customer funds.

On October 11, before the snapshot of Huobi reserves, 175 000 ETH was deposited, and immediately afterward, 10 000 ETH was withdrawn and withdrawn to Binance and OKX. The amount was probably temporarily moved from other places to fill the gap for the snapshot.

The 50,4% share of low liquid tokens, which is too high, is another reason for FUD. They include HT, XCN, TRX, and BETH.

HT is an exchange token of Huobi. The total amount is valued at $204 million, with a turnover of $162 million. Huobi addresses hold HT for 191 million, well above market circulation and reaching 94% of the total number of tokens. Liquidity is scarce.

XCN is a small-cap token, and Huobi currently holds more than 9% of the total supply (1,94 of 21,4 billion), with low liquidity.

TRX is the native token of the TRON network, and Huobi currently holds more than 10% of the turnover (9,7 of 91,8 billion). The asset list published by Huobi lists a total of 13 addresses containing 9,7 billion TRX. Of these, 6 addresses with a balance of 5,4 billion TRX are not associated with Huobi users but are presumably Justin Sun’s personal assets.

BETH is a staked token that users will be able to withdraw after the Shanghai upgrade on the Ethereum network. Therefore, the token is not currently in circulation.

Thus, Huobi holds a much higher percentage of low liquid coins than other exchanges.

For what is happening with Huobi and how the exchange was affected by Justin Sun’s purchase, read GetBlock Magazine’s article.