Huobi Alarming Because Of “Clean” Reserves Only Accounted For 56.57%
CryptoQuant’s statistics show that although Binance started the “reservation” trend, the “clean” reserves only accounted for 89%. Meanwhile, Huobi is alarming about the possibility of trouble when this figure only accounts for 56.57%.
Since the collapse of FTX, the reserve situation of CEXs is attracting the attention of investors because it reflects the health of exchanges.
Binance is the opening exchange for the transparent “trend” of the exchange’s reserve situation. Its continued confidence-building action makes investor sentiment more resilient during the crisis.
However, as previously updated, Mazars, the auditing firm that works with Binance and other crypto exchanges on proof of reserve claims, is suspending its crypto work because of good reason: It’s not producing audits, as has been erroneously claimed.
Besides, in Binance’s latest statement, the spokesperson also stated that the “big four” in the auditing industry include Deloitte (DTT), Ernst & Young (DTT), Ernst & Young (EY), KPMG ( KPMG) and PricewaterhouseCoopers (PwC) were all unwilling to participate in the “proof of reserves” (PoR) report for the private crypto company. This raises concerns that Binance may not be able to get out of the FTX quagmire.
Recently data from a report by CryptoQuant, the company that pioneered the metric, shows how dependent an exchange’s reserves are on its proprietary token.
In the report, Binance’s reserves are 89% clean. In contrast, Huobi’s reserves of around $3 billion are 56.57% ‘clean’, or in other words, 43.3% of its reserves are made up of its own exchange tokens. That’s where we should focus our attention right now, not Binance, as the exchange is the sixth largest and has around $422 million in daily volume per CoinGecko data.
All this comes as Huobi introduces a new burning mechanism to burn more of its token (think: buyback), thus increasing its value. Huobi’s HT token is down nearly 40% on-year, and it’s now priced at $5.46, according to CoinGecko data. In a recent press release, Huobi said there was a 15.94% increase in the number of HT burnt in November compared to October, and this will increase more in the first quarter of 2023.
“Huobi reserves have a highly risky setup at the moment,” Caue Oliveria, one of CryptoQuant’s author-analysts, wrote in a note to CoinDesk. “Tokens issued by the company itself are a risk to the company’s net health, since it is difficult to sustain the veracity of the issuance of these coins.”
Oliveria repeated that FTX’s use of FTT to collateralize loans was one of its causes of failure, and Huobi is playing a dangerous game here.
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