Huobi Sees $100 Million Token Outflows In A Week Since Announcing Layoffs

Huobi Sees $100 Million Token Outflows In A Week

The world’s third largest crypto exchange is facing a liquidity crisis after $60 million worth of assets were withdrawn from the platform in the past week. This came after the company announced that it was laying off 20% of its workforce. 

Huobi is facing turbulent times as the cryptocurrency exchange headed by Justin Sun, the founder of Tron (TRON) blockchain, has experienced token outflows of $64 million dollars since January 5, bringing weekly outflow numbers to $100 million. This came in response to the company’s announcement on Wednesday that it was laying off 20% of its workforce. 

Rumours about Huobi cutting its staff headcount due to facing financial troubles has been making rounds over the past several weeks. However, the news was denied by Sun, who even last week claimed it was “untrue”. The crypto entrepreneur joined the company as an advisor in October 2022. 

The news came into light after crypto journalist Colin Wu reported that Huobi was in discussions with its employees to pay their salaries in USDT and USDC stablecoins instead of fiat currency. The company warned that those who wouldn’t accept the new terms will be dismissed, sparking outrage from employees. 

2022 has seen many companies across industries lay off their staff after facing financial constraints due to the current macroeconomic situation. The bear market has forced many prominent crypto companies to dismiss their employees in order to curb financial instability. In July, US-based crypto exchange Coinbase announced that it would lay off 1,100 employees or 18% of its workforce, while in November, Kraken followed suit by cutting 30% of its workforce or 1,100 employees. In June, Singapore-based exchange also dismissed 260 employees or 5% of its workforce. Binance, the world’s largest crypto exchange by trading volume, has warned its employees to prepare for possible layoffs as CEO Changpeng ‘CZ’ Zhao expects the “next several months to be bumpy”. 

According to Blockchain data analytics firm Nansen, the top withdrawals on Huobi were mainly in USDT at $2.15 million, USDC at $1.41 Million, and $1.2 million in ETH from wallets with high balances. Assets on Ethereum, Avalanche, BNB Chain, Fantom and Polygon wallets were also taken out of the exchange, bringing its net outflow in the past week to a total of $94.2 million. 

In a desperate effort to reduce the losses, Justin Sun sent $100 million to the exchange. On-chain research firm Lookonchain noted that the advisor withdrew $100 million worth of USDT and USDC from his accounts on Binance and transferred the assets to Huobi. Taking his previous transactions into account, Lookonchain says the TRON founder will deposit stablecoins into Circle and Paxos to be cashed out. On December 31, Sun had withdrawn $88 million in BUSD from Binance and deposited the amount in the Paxos Treasury. 

The huge outflow of capital from the platform is worrisome to investors because FTX, the crypto exchange founded by disgraced former billionaire Sam Bankman-Fried, also saw massive withdrawal in stablecoin assets before it imploded in November. 

Ki Young Ju, the CEO of blockchain analytics firm CryptoQuant says Huobi “seems to be very vulnerable at the moment”. While Binance has more than doubled its Bitcoin (BTC) holdings in the past year, Huobi’s BTC reserves are down 90% in the same period. The firm also noted that user engagement on the platform has dropped by 44% since its peak in May 2019, and is 20% lower than that on Binance as of January 3, 2022. 

In a report published in December, CryptoQuant said that Sun’s exchange has the “dirtiest” reserves compared to its rivals because the platform relies heavily on its native HT token, similar to FTX holding most of its reserves in platform exchange token FTT. Huobi currently holds 81% of all HT, or 131.6 million out of 162.2 million tokens currently in supply. At the time of writing, HT is trading at $4.70 – up by 0.4% in the last 24-hours. 

Huobi is one of the world’s largest cryptocurrency exchanges, with a daily transaction volume of $347 million and is visited by 12.5 million users on a monthly basis, states data from CoinGecko.

Also Check: Bitcoin Miner Marathon Digital Pays Off Revolver Credit To Crypto Bank Silvergate 

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