BNB at Risk: Liquidations Threaten Binance Chain & CZ’s Credibility24. August 2023
• Binance exchange is facing scrutiny due to its BNB operations and threshold maintenance.
• A prior Binance Chain exploit caused a potential liquidation scare with 2 million illegally minted BNB by an “exploiter”.
• Liquidations on Venus Protocol could cause the BNB price to plunge, leading to far-reaching consequences for the entire crypto sphere.
Binance Exchange under Scrutiny
Binance exchange has come under public scrutiny due to its shady BNB operations and the artificially maintaining collateral threshold to bolster the coin above a widely-discussed liquidation margin near $212.
Exploit Involving Venus Protocol
The FUD began with a potential liquidation scare related to a prior Binance Chain exploit involving Venus Protocol. The “exploiter” illegally minted 2 million BNB through a BNB Bridge and then deposited this stash onto Venus, taking out $150 million in stablecoins as a loan. This led to concerns about the liquidity of the coin if it were to be liquidated due similar scenarios seen in FTX collapse.
Potential Danger of Liquidations
Liquidation occurs when an exchange forcefully closes a trader’s leveraged position due to partial or total loss of their initial margin. If large positions are liquidated, it could send BNB prices quickly tumbling as tokens are sold in open market in order to save the loan, creating further FUD which leads into more withdrawals and liquidations.
Impact on Crypto Sphere
Binance Smart Chain is currently the third largest DeFi ecosystem that locks $2.8 billion in TVL, collects $263 million in daily fees, and holds $5.2 billion worth of stablecoin market cap on its chain. Additionally, Binance Exchange is one of the largest crypto exchanges globally with 24 hour trading volume at $5.3 billion and daily user count at 1 million users per day on average since April 2021 alone! With these numbers at stake, any risk posed towards their token can have serious implications for them and other players too!
CEO’s Credibility Loss
The CEO has lost his credibility which could worsen the already existing rate of liquidations even more so than before; making it difficult for him come up with a plan that rebuilds stability in this situation without causing wider repercussions throughout all involved industries (including financial).