Justin Sun denies liquidation rumors amid market turmoil

Justin Sun, founder of Tron (TRX) and Huobi (HTX), has denied rumors that leveraged futures positions from HTX have been liquidated in the past 24 hours during the sharp market downturn, claiming that HTX "rarely" engages in leveraged trading.

Sun followed up his remarks by promising to set aside $1 billion "To combat fear, uncertainty, and doubt, invest more, and provide liquidity," though details on this proposed fund remain elusive beyond his initial announcement.

Cointelegraph reached out to Sun for more clarification but was unable to obtain a response by the time of publication.

Weeks of rumors resurface

The speculation surrounding large leveraged positions on HTX began on July 12, after CryptoQuant founder Ki Young Ju drew attention to a $515 million long Bitcoin (BTC) futures trade open on the platform.

According to the analyst, staked Tether stablecoins (stUSDT) were likely used as collateral for the loan, noting that HTX’s $24 million Tether stablecoin (USDT) reserve remained untouched. When Ju contacted Sun and the HTX team for clarification, Sun denied allegations that he was responsible for the large leveraged trade. Sun expressed “frustration" and claimed that clients of the exchange, who are also allowed to use stUSDT and aEthUSDT as collateral, were responsible for the large futures position.

Ju also claimed that Sun refused to divulge who was responsible for the trade, citing HTX customer policy that the exchange did not comment or provide information about client trades.

The market turmoil

The unwinding of a long-established market trade known as the “yen carry trade,” a process of taking out cheap yen-denominated loans to purchase dollar-denominated assets, is largely responsible for the sharp downturn in the crypto and stock markets leading into Aug. 5.

A sudden rise in interest rates from the Bank of Japan, from 0.1% to 0.25%, has put many loans underwater, creating a situation in which many of the positions now carry a higher US dollar price tag than the loans were taken out for. The result is that investors have rushed to sell assets in an attempt to close out these losing positions and protect against the future downside risk of Japan’s central bank raising rates again.

Crypto markets responded by shedding over $1 billion as investors rushed to stabilize shortfalls caused by the recent interest rate hike. The price of Bitcoin briefly crashed below the $50,000 mark, reaching a low of approximately $49,000 on Aug. 5.

Institutional investors likewise panic sold. Weekly inflow data into crypto investment vehicles revealed $528 million in outflows amid the market downturn and broader fears of a looming global recession.