After $200 Million BNB Liquidation: What Comes Next?

In a concerning turn of events, over $200 million worth of BNB (Binance Coin) is at risk of liquidation as the coin’s price approaches the $219 mark. However, BNB Chain and Venus Protocol teams have devised plans to address the situation and mitigate its potential impact.

The predicament traces back to October 2022 when attackers targeted the BNB Bridge, sending over 924,000 BNB (equivalent to $200 million) to the Venus Protocol protocol as collateral for borrowing USDC. According to data from Venus, this position would be liquidated if the price of BNB fell below $219.76.

In theory, when a position is liquidated, the lending protocol must sell that position to repay the lender. In the case of the $200 million BNB position facing liquidation, the direct sale of such a substantial amount on the decentralized market could potentially cause a significant drop in the coin’s value. According to CoinGecko, selling $2 million worth of BNB on Binance could lead to a 2% decrease in the coin’s price.

Currently, BNB is trading at $226, only $6 above the liquidation price. This has instilled fear within the community that the price of BNB may plummet further following the liquidation of the position.

On June 12th, over 63,000 BNB (equivalent to $14.5 million) was transferred back to the Binance exchange, as reported by @whale_alert. Despite the concerns, the BNB Chain and Venus Protocol teams have formulated plans to tackle this situation.

In November 2022, the Venus project approved VIP-79, a proposal from BNB Chain, granting the organization the sole right to liquidate the position of the attacker behind the BNB Bridge incident. Dominik, the Discord channel manager of Venus, confirmed that the BNB Chain team would take over the position and gradually liquidate it to ensure it doesn’t impact the coin’s price.

Source: Discord

He stated, “Given the high volatility, if this position were to be liquidated all at once, it could trigger a cascade effect and cause unnecessary damage to Venus, Venus Protocol users, BNB token, and BNB Chain. The BNB Chain team proposes to become the sole liquidator to safely manage the situation.”

Simultaneously, the BNB Chain team will collaborate with Binance and ecosystem members to assume the position and repay the debt to Venus Protocol.

BNB has recently experienced a significant decline following SEC allegations of securities law violations against the Binance exchange. Over the past week, the price of BNB has dropped nearly 30%, falling from $317 to $225, as per TradingView.

BNB/USDT 4 hour-chart on Binance | Source: TradingView

Despite the challenges, the collaborative efforts between BNB Chain, Venus Protocol, and other stakeholders demonstrate a commitment to protect the interests of BNB holders and ensure the stability of the Venus ecosystem. The outcome of these plans remains crucial for the future trajectory of BNB and its standing in the cryptocurrency market.

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