Binance Coin (BNB) At Risk: A $200 Million Liquidation Is Coming
Binance Coin (BNB) has emerged as a prominent cryptocurrency in recent years, showing significant growth since its inception in 2017. However, the value of BNB has recently declined due to increasing regulatory scrutiny by the US Securities and Exchange Commission (SEC), causing concern among investors and the wider market.
BNB Recent Value Decline
Following an SEC complaint against Binance.US and increased regulatory scrutiny, the trading price of BNB plunged by as much as $260, reflecting losses of more than 7% and 14% respectively in just the last 24 hours and week. The sharp decline can be attributed to the high regulatory environment and broader market trends affecting cryptocurrencies.
Exploitation on the BNB Bridge Puts Funds at Risk
A critical exploit on the BNB bridge has put Binance Coin in a precarious situation, potentially leading to a $200 million liquidation of the Venus Decentralized Autonomous Organization (DAO). If the price of BNB drops by 14% to $220, Venus DAO, which is responsible for governing the Venus Protocol, could face severe consequences. The Venus protocol allows lending, lending, and the ability to generate interest on cryptocurrencies.
Uncovering Exploitation and Its Impact
On October 7, 2022, attackers exploited the BNB bridge by printing 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 profits, resulting in the largest potential liquidation event in Decentralized Finance (DeFi) history. This incident highlights a vulnerability in the DeFi ecosystem, specifically regarding the exploitation of cross-chain bridges.
Resolving Crises and Ensuring Stability
The BNB chain plans to liquidate positions itself to reduce the liquidation flows. Gladly, Venus DAO has opted to whitelist BNB Chain as the sole liquidator of the BNB exploiter addresses. This decision is expected to restore market stability and prevent further disruptions. Investors and stakeholders can feel comfortable with the efforts being made to improve the situation and protect the market as a whole.
Investor Attention Amid Regulatory Actions
Following the SEC’s lawsuit against the main exchange, Nansen, a blockchain and data research firm, has reported a decrease in net outflows from Binance and Coinbase. In the 24 hours since the SEC’s legal action against Coinbase, outflows reduced to $491.9 million and $105.3 million, respectively. This contrasts with Binance’s positive netflow of $78 million, which turned negative to -$123.6 million following the SEC’s request to freeze Binance’s US assets.
The recent decline in the value of BNB and regulatory actions against major exchanges such as Binance and Coinbase have raised concerns about the future of the cryptocurrency industry amid increased regulatory scrutiny.
