One month ago, Huobi made the curious decision to rebrand as HTX, with the letters loosely representing Huobi Tron Exchange. Of course, this name evokes FTX, which has reentered the news as Sam Bankman-Fried’s trial has begun in NY. This change comes as we have noticed unusual activity on HTX, which this piece will detail, beginning first by exploring the exchange’s relationship with Poloniex, then moving to trading volumes, its USDT-USDC pair, and transactions with Binance.
Poloniex
The name change press release stated that Huobi/HTX was entering a new era of synergy with Poloniex, building on their partnership announcement from November 2022. Poloniex is a crypto exchange that had lax KYC rules up until 2018, when it was purchased by Circle, who implemented more stringent KYC checks. As a result, trading volume fell and Circle sold the exchange less than two years later to a group of investors, which was later revealed to include Justin Sun, founder of Tron. Sun moved Poloniex to the Seychelles, a jurisdiction that hosts many of the less transparent crypto exchanges, and reportedly loosened token listing requirements and KYC rules.
Unlike other popular crypto exchanges, Poloniex never exceeded its highest monthly volume figures set during the 2017 frenzy, maxing out at just over $10bn monthly volume in May 2022. That is, until August 2023 – one of the lowest volume months since 2020 for most exchanges – when Poloniex registered $20bn in volume. This surge did not coincide with any major changes that can influence trade volume to such an extent (for example, removing trading fees for major pairs like BTC-USDT).
Notably, the SEC alleged earlier this year that Justin Sun directed employees to wash trade Tron’s token, TRX, as well as BitTorrent’s BTT, to drive interest in the projects.
Below is an example of the unusual volumes on Poloniex, showing the token STT over the past few days. Poloniexhasno information about the token, which is seemingly not listed on any other centralized exchange.
Yet, in the past five days the token has registered nearly $25mn of volume on Poloniex. The massive surge in volume coupled with unusual patterns suggests artificial volumes.
HTX
HTX was founded in 2013 and spent its first years of existence establishing a strong foothold in China, becoming one of the country’s dominant exchanges. As China’s regulatory stance towards crypto soured, HTX expanded to other countries. Still, China’s crypto ban in 2021 dealt a severe blow to the exchange, with its market share dipping from 22% in 2020 to just 4% in 2022.
In October 2022, HTX was sold to an investment firm reportedly headed by Sun, who was appointed to the exchange’s Global Advisory Board. It was unclear what authority this position afforded. This was clarified in January 2023 when an HTX press release stated that, “Under the leadership of Justin Sun, it can be said that Huobi has embarked on the path to rebirth.”
The unusual activity on HTX was first identified in ourDeep Diveon Worldcoin’s launch, which found clusters of matching buys and sells shortly after WLD was listed.
These clusters are unlikely to be organic volume and were persistent enough that they constituted a majority of WLD’s volume on HTX in the days examined.
The scale of the activity was revealed when we examined exchange market share, finding that HTX had exploded from just 4% of centralized exchange volume to nearly 20%. Similar to the surge in volume on Poloniex, which came at roughly the same time, there was no obvious change that could explain such a drastic shift, especially when volumes were at multi-year lows on all other exchanges.
Small altcoins (with less than $1bn of volume from March to October) were responsible for a significant portion of HTX’s volume surge, jumping from $1.4bn the week of July 16 to $3.4bn the following week. Larger altcoins went from $500mn weekly volume to $2.5bn just two weeks later. Meanwhile, BTC and ETH volume stayed roughly the same.
The next piece of the puzzle came when writing my Deep Dive proposing a methodology to measure stablecoin depegs. While researching, I noticed significant USDT depegs on HTX’s USDT-USDC pair. Upon further investigation, it was clear that this was being caused by heavy net selling of USDT for USDC. Since the start of July, a net of $350mn USDT has been sold for USDC.
What’s most striking is how consistent this trend has been; there have only been a few short breaks in selling, each lasting less than 24 hours.
Using Kaiko’s new wallet data, we’ve been able to find that two wallets linked to HTX have transferred nearly $400mn USDC to Binance since the start of July; the first wallet stopped transferring on September 24 and was quickly replaced by the second wallet.
So, in the past three months, a net of $350mn USDT has been systematically sold for USDC on HTX while nearly $400mn USDC has been transferred from HTX to Binance at a similar rate.
A final potential piece of the puzzle comes from a ChainArgos (who previously uncovered that BUSD was not always fully backed) report on stUSDT, a “staked” version of USDT offered by JustLend that is supposed to generate yield by investing deposited USDT in real world assets (RWAs). However, it appears that this is not the case, as ChainArgos states that the “USDT on Huobi that belonged to customers has now been replaced with a fistful of IOUs in the form of stUSDT, with the USDT then re-hypothecated to JustLend.”
HTX currently holds $400mn stUSDT.
Conclusion
While not definitively linked, our data showing net $350mn USDT sold for USDC on HTX, alongside $400mn USDC transfers to Binance in the same timeframe, which also matches the amount of stUSDT held on HTX, is potentially concerning.
Even after regulatory crackdowns by jurisdictions all over the world, there are still broad swaths of the market that are loosely regulated. Whereas on-chain activity can be traced, centralized exchange activity remains something of a black box. Thus, it’s often necessary to combine many data types – in this case OHLCV, tick trade, and wallet data – to reveal a fuller picture of what’s happening on these exchanges.
Kaiko Data Used in This Analysis
Wallet Data: All users, all transactions, and all history for blockchain wallets.
OHLCV: Aggregated trade data in intervals ranging from 1s to 1d
Trade Data: All historical tick-level transactions for 100+ CEXs and DEXs
Kaiko's research newsletter is written by the Kaiko research team: Clara Medalie, Dessislava Aubert, Riyad Carey, and Conor Ryder, CFA. This content is the property of Kaiko, its affiliates and licensors. Any use, reproduction or distribution is permitted only if ownership and source are expressly attributed to Kaiko. This content is for informational purposes only, does not constitute investment advice, and is not intended as an offer or solicitation for the purchase or sale of any financial instrument. For any questions, please email research@kaiko.com.
