What Huobi’s proof of reserves mean

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Hello reader,

Maybe I just don’t have the stomach for it.

I used to be a rather regular crypto investor up until the crash last year. It wasn’t much but it was enough that I certainly felt the pain when everything went south.

When that happened, I started reading up on what to do and asked people for advice. I know, I know, the old adage of “Do your own research.” Still, I was quite inexperienced at the time so I followed what I read from many sources: that it was more important to consistently invest.

That said, it eventually became clear that there was so much going on in the space – not just price drops, but a multitude of bad actors and poorly managed projects – and I was definitely not being diligent enough. When FTX collapsed, I took that as a sign that maybe waiting around a little longer with my money might be a better idea.

If something as huge as FTX could fail so spectacularly, then the legitimacy of every other player in the crypto sector was also called into question, no matter how big they might be. One trading platform that’s fallen under this shadow is Huobi Global, with a proof of reserve showing that it holds over 9.7 billion Tron tokens. Today’s story explores what this finding implies about the firm.

Today we look at:

• Whether Huobi Global is at risk
• Chinese ecommerce enabler Baozun’s acquisition of Gap’s business in Greater China
• Other newsy highlights such as TikTok’s CEO having to testify and a China-based insurtech firm’s Nasdaq listing.

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Potential fire hazard

Since the FTX debacle, there’s been a lot of emphasis placed on exchanges having transparency with their reserves. Many platforms have publicly released some form of proof of reserves, including the likes of Coinbase and Kraken.

Huobi Global has followed suit but the move could have caused even greater doubts to form. The crypto trading platform, which was previously based in China, revealed that it holds over 9.7 billion Tron tokens (TRX) valued at US$544 million.

• Those who fail to learn from history: While there’s nothing illegal or unethical about holding so much TRX, it forms a major portion of its US$2.9 billion in exchange reserves. TRX is issued by the Tron network, which is suspected of being majority-controlled by the same person who created Huobi. This, inevitably, has led people to draw comparisons to FTX and Alameda Research.
• Another algorithmic stablecoin: TRX has a sister token: the algorithmic stablecoin USDD. The pair is modeled after UST and Luna, and we all know how that went. As for USDD, the token has already gone through two depeggings in 2022, with the first happening in June and the second in November. That said, analysts have indicated that it’s difficult for USDD to depeg further in the short term.
• More red flags: Apart from troubling signs with its tokens, the company has also begun requiring employees to take their salaries in either USDT or USDC. Additionally, its native token has seen a price drop and it is looking to reduce its headcount by 20%.

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