Huobi Global finds itself facing risks as investments in the staked USDT (stUSDT) project surge to $1.8 billion.
Spearheaded by crypto entrepreneur Justin Sun, the stUSDT project offers a promising 5% return linked to low-risk securities, such as government bonds.
However, a recent Bloomberg report has raised concerns about Huobi’s extensive involvement in the project. These concerns revolve around the exchange’s ability to manage sudden fund outflows and the transparency of its reserves.
The report sheds light on how Huobi’s close affiliation with the stUSDT project has brought about a significant shift in the exchange’s crypto reserves.
This transformation, combined with the lack of transparency surrounding stUSDT, has prompted institutional traders to withdraw a substantial portion of their crypto holdings from Huobi.
This exodus underscores the potential risks associated with Huobi’s heavy reliance on the stUSDT platform. Blockchain research firms have also expressed worries about the relative lack of transparency regarding the stUSDT project.
The absence of comprehensive information about the project’s investments raises questions about the source and sustainability of the advertised 4.2% yield.
Huobi’s strong connection to the project exposes the exchange to issues that may arise within stUSDT, amplifying its potential vulnerabilities.
As investments in stUSDT have continued to grow, Huobi’s Tether (USDT) reserves have dwindled, further fueling concerns.
Despite Huobi’s assertion that stUSDT is an independent project not under its direct supervision, the substantial presence of stUSDT in its reserves suggests that Huobi’s fortunes are closely tied to the project’s success or failure.
Moreover, the dominance of tokens associated with Justin Sun, such as TRON (TRX) and Huobi Token (HT), in Huobi’s reserves adds an additional layer of risk. Market participants may perceive this concentration as an elevated exchange risk.
Institutional clients, including crypto funds and market makers, have voiced concerns about the prevalence of stUSDT and other Justin Sun-associated tokens in Huobi’s reserves.
Following the launch of the staked Tether project, these clients have swiftly withdrawn a significant portion of their digital assets from the exchange. This departure has contributed to a decline in Huobi’s average daily trading volume.