Tether Stablecoin is Selling Off Over Potential Huobi Insolvency

Tether is experiencing a selloff, and Adams Cochran, a renowned business analyst, thinks the reason behind it is likely Huobi insolvency. Cochran observed Binance started selling USDT stablecoins in bulk when the police started questioning Huobi executives and some Tron personnel. That happened after Tron founder Justin Sun launched the stUSDT stablecoin.

Cochran explained from his findings that, just like in the case of FTT, Binance is often the first to know about risky assets or issues within the industry due to its scales and connections. He notes that the timing of USDT’s selloff last Friday coincides with the questioning of Huobi employees by the authorities.

According to Cochran, the event unfolded following several weeks of steady USDT decline on the Huobi exchange. This decline was triggered by Sun’s stUSDT launch, a token he claims is USDT that is sitting in government bonds and gaining a 4.29% yield.

Cochran revealed in his analysis that Sun and Huobi hold 98% of the tokens. He showed that USDT staked into stUSDT by users is swept into a Huobi deposit address. Based on his findings, Cochran inferred there should have been up to $500 million in redemptions from Huobi addresses on Tron if stUSDT was real. He used a screenshot from his findings to show such redemptions do not exist. Instead, the mint proxy sends tokens directly to the main address.

Using a screenshot, Cochran showed the tokens in the address are sent to other addresses controlled by Sun, including his Binance address. He also revealed that a significant amount of the stablecoin tokens go into Sun’s DeFi positions like JustLend.

Cochran noted that, from the information gathered, Huobi holds only $90 million in USDT and USDC combined. However, the crypto exchange’s “Merkle Tree Audit” still lists Huobi users as having $630M of USDT held, and a wallet balance of $631M USDT.