• Huobi Token [HT], the native token of the popular cryptocurrency exchange, Huobi Global, flash crashed by more than 60% during Thursday trading hours.
• The crash could be due to the increasingly negative sentiment that has engulfed the wider cryptocurrency exchange market following the hawkish stance of financial regulators and the recent collapse of the crypto-friendly bank, Silvergate.
• Huobi will create a $100 million fund to improve the liquidity depth of HT and other cryptocurrencies.
Huobi Token Flash Crash
The native token of popular cryptocurrency exchange, Huobi Global, experienced a sharp drop in value on Thursday (9 March). CoinMarketCap data shows that Huobi Token [HT] fell from $4.74 to $1.83 in a matter of 25 minutes – a decrease of over 60%. The token soon regained ground and was last trading at $3.82 – down 20% for the day.
Reasons Behind Crash
The sudden plunge led to about $2.55 million worth of long positions being liquidated on Thursday. Justin Sun, an advisor at Huobi, stated that this was due to some users triggering leveraged liquidations. He also added that they would be creating a $100 million fund to improve liquidity depth for HT and other cryptos.
Twitter users weren’t so convinced with Justin Sun’s explanation behind the crash and questioned why there was need for such a large fund when only few users were responsible for triggering leveraged liquidations.
Supply on Exchanges Falls
The news triggered an increase in short positions taken for HT as its Longs/Shorts Ratio fell from 0.99 to 0.87 according to Coinglass data. There was also significant buzz generated around HT on social media as Santiment data showed its monthly high in terms of social volume on 9 March 2021 .In addition, supply on exchanges recorded a sharp fall as many users took their funds out fearing an FTX-like scenario occurring again in future..
In conclusion, despite recovering quickly after crashing by more than 60%, questions still remain around why such an incident occurred and if it could happen again in future due to increasing FUD surrounding cryptocurrencies and their regulations by financial authorities across countries worldwide