More than the risks to its financial reserves, and all the news about withdrawals, there is yet another reason that currently ticks off investors about Huobi.
In June, Justin Sun floated a brainchild project that was targeted at crypto investors who had a knack for very high yields. Per his pitch, the project promised returns of 5% on low-risk securities like government bonds.
Although there were always high expectations for the project, it may have already surpassed all. Barely two and a half months on, investments in its product — known as stUSDT — have grown to $1.8 billion, signaling what a big hit the project is proving to be.
But then, there is a downside to the story. The huge success so far also poses an appreciable amount of threat to Huobi Global, the crypto exchange that Sun runs.
There is one major way to invest in stUSDT, and that’s via Huobi. However, this setup has affected the exchange’s crypto reserves in ways that are causing analysts to raise concerns. That is about its ability to cope if a massive outflow of funds occurs.
As institutional investors have found that the analysts may be right in their line of reasoning, they have also started withdrawing most of their crypto holdings from the exchange. That is according to an inside source who spoke to Financial Express on the condition of anonymity.
The Role of Justin Sun in Casting a Shadow of Doubt Over Huobi
More than the risks to its financial reserves, and all the news about withdrawals, there is yet another reason that currently ticks off investors about Huobi. And Sun may have unknowingly contributed to that effect.
Recently, Cryptopurity reported from a Huobi press conference last week as Sun announced that the exchange was rebranding to HTX. The controversial announcement, however, raised eyebrows as the new name bore a striking semblance to the collapsed FTX exchange.
Although that may be sentimental, there is no doubt that investors have been more cautious with their funds on exchanges. That is since the infamous collapse of the FTX exchange last November.