Blockchain News

Binance Coin (BNB) At Risk: $200 Million Liquidation Looms

Binance Coin (BNB) has emerged as a standout cryptocurrency in recent years, showcasing significant growth since its inception in 2017. However, BNB’s value has recently declined due to mounting regulatory oversight by the US Securities and Exchange Commission (SEC), causing concern among investors and the broader market.

BNB’s Recent Value Decline 

In the wake of the SEC’s complaint against Binance.US and increased regulatory scrutiny, BNB’s trading price has plummeted to $260, reflecting drops of over 7% and 14% in just 24 hours and the past week, respectively. The sharp decline can be attributed to the heightened regulatory environment and broader market trends affecting cryptocurrencies.

Exploit on BNB Bridge Puts Funds at Risk 

A critical exploit on the BNB bridge has placed Binance Coin in a precarious situation, potentially leading to a liquidation of $200 million on the Venus Decentralized Autonomous Organization (DAO). If the price of BNB drops by 14% to $220, the Venus DAO, responsible for governing the Venus Protocol, could face severe consequences. The Venus Protocol enables cryptocurrency lending, borrowing, and interest-earning capabilities.

Uncovering the Exploit and Its Impact

On October 7th, 2022, an attacker exploited the BNB bridge by minting 2 million BNB (equivalent to $593 million) and depositing 900,000 BNB as collateral on Venus. They then laundered other assets on Venus to maximize their gains, resulting in the largest potential liquidation event in the history of Decentralized Finance (DeFi). This incident highlights the vulnerabilities within the DeFi ecosystem, specifically related to cross-chain bridge exploits.

Resolving the Crisis and Ensuring Stability 

The BNB Chain plans to liquidate the position itself to mitigate cascading liquidations. Encouragingly, Venus DAO has voted to whitelist BNB Chain as the sole liquidator of the BNB exploiter address. This decision is expected to restore market stability and prevent further disruptions. Investors and stakeholders can take some comfort in the efforts being made to rectify the situation and safeguard the overall market.

Investor Caution Amidst Regulatory Actions 

Following the SEC’s lawsuit against major exchanges, Nansen, a blockchain and data research firm, has reported decreased net outflows from Binance and Coinbase. In the 24 hours since the SEC’s legal action against Coinbase, the outflows reduced to $491.9 million and $105.3 million, respectively. This contrasts with Binance’s positive netflow of $78 million, which turned negative at -$123.6 million following the SEC’s request to freeze Binance’s US assets.

The recent decline in BNB’s value and the regulatory actions against major exchanges like Binance and Coinbase have raised concerns about the future of the cryptocurrency industry amidst increased regulatory scrutiny.

Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Crypto is not a legal tender and is subject to market risks. Readers are advised to seek expert advice and read offer document(s) along with related important literature on the subject carefully before making any kind of investment whatsoever. Crypto market predictions are speculative and any investment made shall be at the sole cost and risk of the readers.