In answer In response to the increasing speculation and allegations circulating within the crypto community, Binance CEO Changpeng Zhao (CZ) has addressed the allegations of a significant sell-off of Bitcoin (BTC) by Binance. These allegations have been linked to a 7% BTC price drop.
CZ responded on Twitter and posted again thread by a user named ZkHopium, who provided a detailed analysis that debunked the claims and highlighted the fundamental basis of the situation.
CZ Debunks Bitcoin Dumping Allegations
ZkHopium’s thread sheds light on the events surrounding the liquidation of the Binance Coin (BNB) on the Venus Protocol. It is explained that the exploit took place on October 6, 2022 on the Binance Smart Chain (BSC), creating 2 million BNB.
Of this amount, 900,000 BNB was deposited into the Venus Protocol to borrow approximately $150 million in USDT and USDC. In response, the BNB chain burned over 2 million BNB, which amounted to approximately $550 million at the time, effectively removing these tokens from circulation.
To facilitate the liquidation process, the Venus Protocol has passed a governance proposal designating BNB Chain as the sole liquidator for the loan. BNB Chain then funded the trustee’s purse with BUSD 30 million in December 2022, another USD 30 million in June 2023 and another USD 30 million on August 21, 2023.
The liquidation mechanism of the Venus Protocol includes a collateral factor or liquidation threshold. When activated, liquidators can gradually liquidate up to 50% of the collateral, receiving an additional 10% of liquidated collateral as compensation.
ZkHopium’s analysis highlights several key factors that make this case unique. Firstly, only one receiver is not incentivized to participate in market dumping. Secondly, the liquidations are done manually, without the involvement of bots leading the process.
Finally, given the significant size of the loans, liquidation tranches are expected to be well below the 50% threshold.
In response to the allegations, CZ expressed his appreciation for the detailed research presented by ZkHopium and stressed the “insignificance” of the impact of a $30 million liquidation on Bitcoin’s price.
CZ stated that Binance does not issue BTC and most of the rewards are given in BNB. He stressed that the alleged fears of a significant price impact from BTC are unfounded, as $30 million represents less than 0.001% of BTC’s daily trading volume.
At the time of writing, BNB is trading at $217 as the chart above indicates. However, the economy has experienced a marginal decline of 0.2% over the past 24 hours.
BTC is hovering around $26,000 during a minor dip
The largest cryptocurrency in the market by market capitalization, Bitcoin, currently valued at $26,000, has remained relatively stable, dropping 2.4% after briefly hitting the $26,700 mark.
Despite the current low volatility, Keith Alan, co-founder of research and analysis firm Material Indicators, has noted the following regarding the market situation:
The economic reports released this morning had no significant impact on volatility; however, they will add to the narrative influenced by Jerome Powell’s upcoming Jackson Hole speech on Friday.
As anticipation mounts for Fed Chairman Jerome Powell’s comments at the Jackson Hole Symposium, the Bitcoin market is starting to show signs of increased activity.
Keith Alan suggests that the economic reports, while not directly impacting volatility, will shape Powell’s story during his speech.
This expectation is likely to lead to increased volatility as the BTC market approaches the weekend. Traders and investors are bracing for potential market swings as Powell’s speech unfolds, expecting his statements could have a significant impact on the cryptocurrency market.
Featured image from iStock, chart from TradingView.com
