Key Takeaways:
- An analyst says Venus liquidations are no threat to Binance Chain.
- The FUD lacks “fundamental soundness.”
- BNB is beyond the crucial margin of $192 and stands at $219.
YEREVAN (CoinChapter.com) — The crypto space was filled with much speculation in recent days concerning Binance’s allegedly shady Bitcoin holdings dump in attempts to bolster the unstable BNB price and the looming liquidations on Venus Protocol, threatening more volatility for the Binance backbone.
However, some analysts have an optimistic outlook, denying the potential cascading effects from the BNB margin call.
For example, the pseudonymous @zkhopium, with over 340,000 followers, posted a lengthy thread exploring if the accusations of possible market manipulation have merit.
However, before delving into the thread, here is a short recap of what happened:
What Happened to the Illegal 2M BNB Mint — Why is Binance Chain the Sole Liquidator?
The FUD began with a potential liquidation scare related to a prior Binance Chain exploit (in Oct 2022) involving the Venus Protocol.
The “exploiter” illegally minted 2 million BNB through a BNB Bridge. The culprit then deposited a 900,000 BNB stash onto Venus to borrow $150 million in stablecoins. Binance then responded to the attack by burning an equivalent amount of BNB, taking them out of circulation.
Moreover, Venus Protocol responded by passing a governance proposal, VIP-79, to whitelist BNB Chain as the designated sole liquidator for the mentioned $150 million stablecoin loan. Simultaneously, Binance Chain prepared a liquidation wallet.
To prepare for liquidation, BNB Chain funded the designated liquidator wallet with 30m BUSD in December 2022, and added another 30m of USDT in June 2023; and most recently, another 30m of USDT on August 21st 2023.
said @Zkhopium, providing a wallet overview to back their assumption.
BNB FUD Lacks “Fundamental Soundness”
Venus liquidations have the following succession, as described by the analyst. All loan collateral is given a collateral factor, a.k.a. liquidation threshold. Once triggered, liquidators can liquidate up to 50% of collateral at a time and receive an additional 10% worth of liquidated collateral as fees.
Now, Binance Chain, being the sole liquidator, has “no incentive” to dump the market, says @zkhopium.
Additionally, “due to the large loan size, liquidation tranches are likely to be much lower than 50%.” They also posted a “back-of-napkin calculation,” according to which the net liquidation threshold would be $196.
For reference, the BNB coin price reached over $219 on Aug 24, bouncing 8% back from the $203 bottom on Aug 22.
The liquidator, i.e., Binance Chain, repaid 60 million USDT, amounting to just under 297,000 BNB being liquidated and funded another 30 million USDT on Aug 21, 2023.
The analyst concluded that BNB Chain is unlikely to market dump seized collateral. Thus, the scenario where the platform floods the market with “$200 million+ BNB” also appeared unrealistic.
Notably, Binance head Changpeng “CZ” Zhao has previously commented that his company never sold Bitcoin, or any other holdings, for that matter, to bolster BNB’s price. However, his words might not convince some market participants who cite his lack of credibility.
CZ also referred to the FUD analysis, saying he “learned a few things from it, too.”
