The outflow of funds from cryptocurrency exchange Huobi continues, with the total value of assets locked in the DeFi protocols on the blockchain (TVL) falling to $2.5 billion over the month, down from $3 billion in July.
Cryptocurrency analyst Adam Cochran linked Huobi's weakening financial stability to Binance's massive sale of Tether (USDT).
"Why is Tether selling off? Likely due to Huobi's insolvency," Cochran wrote on his X (Twitter) page.
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In addition, the analyst pointed out another reason for TVL's decline: rumors that Huobi's management team and employees of Tron, a blockchain platform founded by Justin Sun, were questioned by the police.
Apparently, it was this information that prompted cryptocurrency exchange Binance to stage an aggressive sell-off of USDT in an attempt to mitigate potential risks, as Cochran pointed out.
Another reason, the analyst said, was Binance's desire to reduce the dominance of USDT, thus increasing the demand for other stable coins, which the exchange can control and profit from.
The analyst also noted Huobi's USDT asset shortfall, which he believes is related to the actions of Justin Sun, the founder of the Tron network.
Cochran believes that the missing funds indicated by Huobi's "Merkle tree audit" are being used to support the profitability of Tron, Poloniex, and other DeFi projects controlled by Sun.
However, even taking into account the funds that Justin Sun may be using to support his DeFi apps, this is only half of the total commitment to Huobi.
All of this suggests that Huobi's financial obligations don't look balanced at all, and this is fueling rumors of its instability, Cochran said.
It's worth noting that the exchange's social media representative (@33Huobi) commented on Cochran's speculation, saying that all information about the police questioning Huobi and Tron representatives is just rumors and nothing more, adding that Huobi's work is going on normally and all operations are being carried out "as usual."
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Also read: Coinbase may stop trading Cardano (ADA).
