Crypto exchange Huobi has bad news

This is bad news that the cryptocurrency industry could have done without.

This information suggests that the very difficult time the fledgling blockchain-powered financial services industry is going through is far from over.

Cryptocurrency exchange Huobi just announced a 20% reduction in its workforce in a bid to cut costs to cope with the fall in cryptocurrency prices.

“Given the current state of the bear market, a very lean team will be maintained going forward,” Huobi’s spokesman told Reuters.

At the end of October, the company employed around 1,600 people. However, it is difficult to say the exact number of jobs that will be eliminated as we do not have current figures.

Huobi token affected

Based in Seychelles, Huobi is one of the largest cryptocurrency exchanges. According to data company CoinGecko, the platform saw about $318 million in trading volume in the last 24 hours.

The announcement of the downsizing has had an impact on HT, the native token or the cryptocurrency issued by the Huobi ecosystem. HT is down 7% over the past seven days.

The firm was founded in China in 2013 but was forced into exile after Beijing cracked down on the crypto industry. As a result, Huobi now has its consulting and research activities only in mainland China, while trading activities take place outside of the country. It has offices in Hong Kong, South Korea, Japan and the United States

The company is owned by About Capital Management, a Hong Kong-based asset management company.

Huobi, like all cryptocurrency exchanges, has been the subject of doubts and suspicions about its solidity following FTX’s unexpected bankruptcy. Founded by Sam Bankman-Fried, FTX, which is considered one of the strongest companies in the crypto space after being valued at $32 billion as of February, went bankrupt on Nov. 11, unable to meet its customers’ massive withdrawal requests.

Since then, an air of suspicion has surrounded the rest of the exchanges. Binance, the world’s largest cryptocurrency exchange, was the subject of many rumors in December, leading to customers withdrawing $6 billion from Dec. 12-14, a spokesman told TheStreet at the time.

To care

This suspicion was reinforced by the decision by accounting firm Mazars to cut ties with all crypto firms.

Mazars said in December that it “paused its activities related to providing proof of reserve reports to companies in the cryptocurrency sector due to concerns about how those reports are understood by the public.”

The goal of the proof of reserves audit is to show that the crypto firm has enough reserves to deal with an onslaught from its customers and investors. This audit is also intended to boost public trust and demonstrate transparency when most crypto firms are unregulated, meaning they are opaque and investors and customers can only rely on what top executives say.

Billionaire Mark Cuban has also warned in an interview with TheStreet of a possible implosion of the illegal practice of washing trades, which is expected to severely disrupt centralized exchanges.

“I think the next possible implosion is the discovery and removal of wash trades on core exchanges,” the Dallas Mavericks owner told TheStreet in an email interview. “There are said to be tens of millions of dollars in trades and liquidity for tokens that are being used very little. I don’t see how they can be so liquid.”

A wash trade, an illegal practice, consists of creating an artificial interest in a financial product — in this case, a crypto token or coin — in order to make a profit. This form of “pump and dump” scheme is widespread in the cryptocurrency industry.

While many wash trades have taken place in traditional finance, the crypto space is particularly conducive to the practice, with almost 13,000 cryptocurrencies listed, according to data firm CoinGecko. Scammers need to highlight a token or two from this pack in order for them to engage in the wash trade.

For example, according to a 2022 Forbes magazine study of 157 centralized cryptocurrency exchanges, more than half the volume of Bitcoin exchanges is fake.