Binance Coin (BNB) has been one of the best-performing cryptocurrencies in recent years, with a significant increase in value since its launch in 2017. However, the coin has experienced a sharp fall in value following the recent Securities and Exchange Commission (SEC) complaint against Binance .US and more regulatory oversight by the US watchdog.
Currently, BNB is trading at $260, down more than 7% and 14% in 24 hours and the past seven days, respectively. This decline is attributed to recent regulatory scrutiny and broader market trends.
BNB price drop creates problems
The BNB bridge suffered an exploit that has put Binance Coin in a precarious position, with a potential $200 million liquidation on the Venus Decentralized Autonomous Organization (DAO) looming if the price drops 14% to $220.
Venus DAO is a community-driven organization that operates the Venus Protocol, a decentralized lending and lending platform built on the Binance Smart Chain. The Venus Protocol allows users to borrow and lend cryptocurrencies and earn interest on their holdings.
According to according to the researcher DeFi Ignas, the exploit took place on October 7, 2022, when an attacker earned 2 million BNB ($593 million) and deposited 900,000 BNB as collateral to Venus. They then borrowed other assets on Venus to launder as much money as possible. This is the largest potential liquidation in all of Decentralized Finance (DeFi) and cannot be closed.
After the exploit, BNB Chain was shut down to upgrade the network, and the Binance Bridge hack is now the third largest hack. All three of the top hacks are cross-chain bridge exploits, highlighting the vulnerabilities of the DeFi ecosystem.
To avoid cascading liquidations, the BNB Chain will liquidate the position itself, according to Ignas. However, the good news is that Venus DAO has voted to whitelist BNB Chain as the sole liquidator of the BNB exploiter’s address. This move should help prevent further market disruptions and bring some stability to the market.
Binance.US Netflow plummets
Blockchain and data research firm Nansen has reported that net outflows from major cryptocurrency exchanges Binance and Coinbase have slowed in the 24 hours following news of the SEC lawsuit against Coinbase. Outflows fell to $491.9 million and $105.3 million, respectively.
This contrasts with the situation 24 hours after the SEC sued Binance when Binance’s net flow was $78 million positive. However, after the SEC filed a request for a temporary restraining order to freeze Binance’s US assets, Binance’s net flow turned negative, falling to -$123.6 million.
The decline in net outflows from Binance and Coinbase suggests that investors are becoming more cautious in light of SEC legal action against major cryptocurrency exchanges. In particular, the SEC’s lawsuit against Coinbase has raised concerns about the regulatory scrutiny facing the crypto industry as a whole.
Featured image of Unsplash, chart from TradingView.com