This article is a deep analysis of Huobi.com asset list. First, we reviewed the information about the events before and after the announcement of Huobi's asset list, and combed through the FUDs on Twitter about the asset list, including the questioning of the validity of BETH funds and the misappropriation, and questioning of a large number of ETH transfers. Then, we analyzed these FUDs based on the on-chain data, and these FUDs did not hold up. Finally, we evaluated the Huobi's assets based on our Checklist and found that more than 50% assets(around $1.744 billion) with low liquidity, $215 million assets on the HECO chain is over-calculation, and $300 million TRX assets are Sun's personal assets. In general, a high proportion of illiquid assets is a significant risk. The actual assets at risk amounted to $1.84 billion, around 53% of the total published assets. In addition, we also gave our judgment on the market, with HT Token bearish and Huobi-issued BETH bullish.(Does not constitute investment advice)

——This article is jointly published by X-explore and WuBlockchain

1. Background

In early November, a mega bank run on the centralized exchange FTX occurred, with over $6 billion in assets withdrawn within 2 to 3 days, causing liquidity collapse and ultimately leading to FTX's bankruptcy. In order to prove that there was no misappropriation of user assets, exchanges have published lists of their own asset information and exposed the exchange's custody of the assets to the public. According to information from Nansen Portfolio statistics, 18 head exchanges have now published asset information. The list is available on the exchanges' websites, CoinMarketCap (https://coinmarketcap.com/zh/exchanges/binance/#reserve) and Nansen (https://portfolio.nansen.ai/entities). We can find detailed information, including addresses and asset amounts.

As the asset lists were disclosed to the public, the continuing bank run was stabilized. But there still remain doubts in the community. Due to Huobi's layoff, the event of Altcoin Pi, and the event of rat trading, the vibe of FUD has been intensified, including doubts about Huobi's asset list.

Therefore, we planned to conduct an objective analysis of each exchange's asset information list in order to rebuild confidence in the community. We made a CheckList analysis from three perspectives.

1. Validity of Assets

   1. Assets with the correct balance

   2. Assets with clear ownership

   3. Assets originated from platform users

2. Rationality of Assets

   1. Proportion of mainstream tokens

   2. Proportion of illiquid tokens

3. Utilization of Assets

   1. Not used for investments

   2. Not linked to risky institutions

Huobi On Chain Asset

2.1 Overview of Huobi's Asset

In early October 2022, About Capital Management acquired shares from Huobi's big shareholders. Justin Sun is the core contributor to this Merge and Acquisition fund, at a purchase price of $ 1 billion upwards (source: Wushuo Exclusive News, H.E. Justin Sun (@justinsuntron)), with 100% margin reserve verification completed during the handover process.

on November 13, Huobi disclosed the hot and cold wallet addresses and asset reserves - Huobi's Work Report on Asset Transparency (I), in which 32K BTC, 274K ETH, 820M USDT, and 9.7B TRX were announced, equivalent to 3.5B USD in total.

At the same time, in order to further rebuild users' confidence and accelerate the process of asset transparency construction work, Huobi announced in Huobi's Work Report on Asset Transparency (I) that Huobi would cooperate with a third party to complete the 100% margin Merkle tree reserve proof and publicize it to the public within a month (two months already passed and Huobi has not fulfilled its promise until now...)

2.2 Community FUD

Since the community continues to have doubts about the assets list, we collected the related information from Twitter and the information thus can be classified into three types.

2.2.1 Question on the Validity of the BETH

The public address 0xa929022c9107643515f5c777ce9a910f0d1e490c has 96,671 BETH. This address is the cross-chain bridge for the HECO chain issued by Huobi. However, no BETH assets are found in Etherscan (From Moc@Btman_Jeff). In addition, the address has only 22,278 ETH, which is not enough to create a 1:1 staking relationship with the announced amount of 96,671 BETH. (From DeFi小矿工@DeFi8362).

2.2.2 Question on the Misappropriation of Funds

From the data on the chain, Binance holds $6.06 billion ETH and $108 million Beth, with a staking ratio of 0.017; Huobi holds $151 million ETH but $128 million HBeth, with a staking ratio of 0.85. That means a large part of Huobi users' ETH is staked. The difference in behavior is nearly 50 times, so Huobi may have privately misappropriated customer funds to make pledges to earn revenue without user authorization (FROM BitRun@BitRunX).

2.2.3 Question on Clear Ownership?

Before the Huobi snapshot (October 11), 175,000 ETH was deposited, and immediately after the Huobi snapshot (November 13), 10,000 ETH was withdrawn from the withdrawal address 0xCAc..... .3Fc(Huobi 34) and withdrew 10,000 ETH to Binance and OKX respectively. Probably the amount was temporarily moved from other places to fill the gap for the snapshot and returned after the snapshot (FROM Moc@Btman_Jeff).

3. X-explore Analysis

3.1 CheckList Analysis

Based on the CheckList, we analyzed Huobi's asset list: more than 50% of them are low-liquidity assets. $215 million HECO on-chain assets are over-calculated, and $300 million TRX assets are Sun's personal assets.

1. Validity of Assets

   1. Assets with the correct balance

      1. Existence of pledged assets worth $215 million HECO chain over-calculated (refer to 3.3.3)

   2. Assets with clear ownership ✅

   3. Assets originated from platform users

      1. Existence of $300 million worth of TRX chain assets is not relevant to Huobi users (refer to 3.3.2)

2. Rationality of Assets

   1. Proportion of mainstream tokens, valued at $1.675 Billion ($550 million BTC, $226 million ETH, $816 million USDT, $60.04 million USDC, $20.32 million XRP）

   2. Proportion of illiquid tokens, valued at $1.744 Billion ($1 billion HT, $0.98 billion XCN, $530 million TRX, $116 million BETH)

3. Utilization of Assets

   1. No use for investments✅

   2. No link to risky institutions✅

3.2 Community FUD Analysis

3.2.1 BETH Validity of Assets & Misappropriate Funds

BETH's capital reserve is real and valid, and the anchor assets are about $116 million in the beacon chain. In the asset list published by Huobi, the address 0xa92......490c (cross-chain bridge of HECO chain) has assets of 96,671 BETH on ETH chain, and the information from the official website shows that its collateralized ETH has been pledged to the Ether 2.0 beacon chain.

From the on-chain data, we found that two addresses closely associated with Huobi were heavily involved in beacon chain pledges, with a total pledge amount of 91,552 ETH, very close to the published BETH asset count.

1. The source of funds is Huobi's address 0xB73f4d4E99F65Ec4B16B684e44f81Aeca5ba2B7C the gradual accumulation of pledges in the beacon chain from December 2020 51776 ETH

2. The source of funds is Huobi's address 0x194BD70B59491ce1310ea0BCeAbdb6c23aC9D5b2 Gradual accumulation of pledges in the beacon chain from December 2020 39776 ETH

After the upgrade in Shanghai, this pledged ETH will be available for withdrawal when the Ether 2.0 beacon chain pledged ETH is open for withdrawal. Therefore, the fund reserve of BETH is real and valid. The answer to Twitter users' questions about BETH without a pledge and questions about Huobi's misappropriation of BETH pledge funds is clear.

3.2.2 ETH Assets Clear Ownership

Address 0xCAc......3Fc(Huobi 34) Before Oct 11, the large amount of deposit is Huobi transferring 169,000 ETH from a multi-signature wallet, the source of funds is Huobi out of the money bag, combined with the time node of Sun's acquisition of Huobi can be learned, should be acquired and the asset finishing（transaction info).

Address 0xCAc......3Fc(Huobi 34) the 10,000 ETH withdrawal after the snapshot is not external funds dispatched for the snapshot. Officials say this behavior is the personal behavior of large investors. The platform does not have restrictions.

The 10,000 ETH withdrawal after the snapshot is not external funds dispatched for the snapshot. Officials say this behavior is the personal behavior of large investors. The platform does not have restrictions.

The incident occurred at the time of the FTX crash, and Huobi was seeing nearly 20k ETH transfers daily. If the official response is true, it is reasonable in terms of the amount.

3.3 Risk Analysis

3.3.1 Too Much Share of Low Liquidity Tokens（50.4%)

Low liquidity token valued at $1.744 billion ($1 billion HT, $0.98 billion XCN, $530 million TRX, $116 million BETH)

• HT is the platform coin issued by Huobi. The total number of tokens is currently 204 million HT, and according to Huobi's published data, the market circulation is 162 million HT. The current address holdings on Huobi's published asset list are 191 million HT, far exceeding the market circulation and reaching 94% of the total number of tokens. Liquidity is insufficient.

• XCN is a small-cap Token, and Huobi currently holds more than 9% of the total circulation of this coin (1.94 billion held by Huobi, 21.4 billion in total circulation), with low liquidity.

• TRX is the native Token of TRON chain, Huobi currently holds more than 10% of the total circulation of this coin (9.7 billion held by Huobi, 91.8 billion in total circulation), with low liquidity.

• BETH is a staked-locked Token, which must be upgraded in Shanghai by Ethernet before users can withdraw the Token, and thus the Token is not currently circulating.

The following is a comparison of other exchanges' holdings in mainstream assets as well as in these few less liquid assets.

As can be seen from the table above, Huobi holds a much higher percentage of these low-liquidity coins than its peers. Referring to the huge drop in FTT prices in the FTX event, when a bank run occurs on the exchange, the market does not have enough depth to receive the sell-off of low liquidity coins, thus leading to a significant drop in the price of these coins and thus triggering a significant drawdown of platform funds.

3.3.2 $300 million TRX chain assets are not related to Huobi users

In the list of assets published by Huobi, a total of 13 addresses on the TRX chain are listed, totaling 9.7 billion TRX, of which 6 addresses accumulating 5.4 billion TRX (about $300 million USD) are not related to Huobi users, and are TRX airdropped when the TRX chain was launched, suspected to be Justin Sun's personal assets.

As shown above, we performed an on-chain trace. Six of the addresses in the asset list received transfers from the Coin Hot Wallet accumulating $5.4 billion TRX on May 26, May 30 to June 4, and June 15, 2022.

Meanwhile, on May 24, May 29, and May 30, 2022, a certain Coin user's deposit address received cumulative transfers of 12.3 billion TRX. These funds all came directly from TRX, which was suspected to have been airdropped on Justin Sun's personal address when the TRX chain went live in June 2018.

In the first 20 days of May 2022, Binance's average daily deposits and withdrawals were about $500 million TRX. However, deposits were 2.7 billion on May 24 and 8.4 billion on May 30. In terms of withdrawals, 1.6 billion were made on May 26, 4 billion on May 30, 3.1 billion on June 1, and 2 billion on June 2. Therefore, we can directly correlate the large deposits and withdrawals in late May, and thus speculate that the 5.4 billion TRX in the asset list published by Huobi is suspected to be Justin Sun's personal assets.

地址清单：

Huobi asset reserves announced addresses：
TF2fmSbg5HAD34KPUH7WtWCxxvgXHohzYM
TYh6mgoMNZTCsgpYHBz7gttEfrQmDMABub
TKgD8Qnx9Zw3DNvG6o83PkufnMbtEXis4T
THZovMcKoZaV9zzFTWteQYd2f3NEvnzxAM
TZ1SsapyhKNWaVLca6P2qgVzkHTdk6nkXa
TRSXRWudzfzY4jH7AaMowdMNUXDkHisbcd

Binance Hot Wallet
TV6MuMXfmLbBqPZvBHdwFsDnQeVfnmiuSi

Binance Deposit Address
TJkgTCg91dEfsT9to74VDXi7uUxRDqF2ft

Suspicious Justin Sun Own Addresses
TSnjgPDQfuxx72iaPy82v3T8HrsN4GVJzW
TGqxgpMFfvUcpC2R4JccY1t6oFe8WfTQGT
TTNaP9JFf2MvCs1jJUVH8Eh5tiD8Cg8aC2

3.3.3 HECO chain staked assets over-calculated by $215 million

Included in the list of assets published by Huobi is the address 0xa929022c9107643515f5c777ce9a910f0d1e490c A total of $236 million assets on the ETH chain. This address is the staked address for assets (including USDT, ETH, BETH) on the HECO chain collateralized ETH chain. The assets on this address are minted and circulated 1:1 on the HECO chain. Therefore, only the portion of this asset that is actually owned by Huobi on the HECO chain can be considered Huobi's asset, and the remainder is all user assets. Assets of non-platform users exist, but he himself says that they are part of the main asset reserve in the hot and cold wallets.

We analyzed the top holding addresses of these 3 types of assets on the HECO chain and found that 8 of them can be associated as Huobi addresses and the rest are all considered by us as user assets. Including:

• BETH for Huobi-associated addresses accounted for 4.71% of the total issuance

• USDT for Huobi-associated addresses accounted for 8.39% of the total issue volume.

• The ETH of Huobi-associated addresses accounts for 14.82% of the total issue volume.

Therefore, the total over-calculated assets after removing Huobi-affiliated addresses are $215 million.
Appendix：

linked to Huobi addresses on HECO chain：
0xcee6de4290a4002de8712d16f8cfba03cb9afcf4 beth 4.71%
0x1d8c642891a10188290c58753d75828214967354 usdt 5.61%
0x74bcd3333c44120acf47a68bb8532f1be0eded2b usdt 1.59%
0x67221451121647e46dc691d7f2188f4c10e868dd usdt 1.18%
0xc9121e476155ebf0b794b7b351808af3787e727d hbtc 4.86%
0xee367ce9b18b1bd445909edac8eb0a6c33c10a51 hbtc 4.23%
0x69f8dc5c4d8f7da1ab241c19b8fbc202bd9a1f09 shib 0.29%
0xcee6de4290a4002de8712d16f8cfba03cb9afcf4 usdc 64.63% 
0x3dd223968c2acb1071dfb327cc0065a5fa4d4b15 eth  14.82%

3.4 Risk Reminder

3.4.1 HT Bearish

Currently, HT Token is fully open for circulation with a total liquidity of 203,980,445, of which over 93% of the assets are in Huobi's asset list. At the same time, the current full buy order on the Huobi market is $10 million, or 5% of total liquidity, and HT is not listed on any of the major exchanges, including Binance, OKX, Bybit, Coinbase, Crypto.com. Therefore, in the event of a bank run or other threatening event on Huobi, the market does not have sufficient depth to receive the HT sell-off, thus causing the coin price to dive significantly. This has happened many times in history. For example, FTT plunged 90% in a bank run on FTX, and FIL plunged 30% in a massive sell-off of assets by DCG.

3.4.2 BETH Bullish

The current BETH issued by Huobi has been decoupled from the price of ETH by 10%. In fact, Huobi staked a full amount of ETH on the beacon chain (details 3.2.1), so after the Shanghai Upgrade, users can exchange BETH to ETH 1:1 directly on the platform. Therefore, the decoupling phenomenon will end soon. The official website of Huobi ETH2 staked campaign also has instructions for redeeming tokens.

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