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According to data from DeFiLlama, Binance’s BNB ecosystem could encounter a $200 million liquidation if its price drops below $220.
In the last week, BNB has undergone a notable sell-off as cryptocurrency traders decreased their holdings in the token amid regulatory challenges. On June 5, the U.S. Securities and Exchange Commission (SEC) initiated legal action against Binance, claiming the company had breached federal securities regulations.
Among the accusations, it was asserted that the BNB coin and the Binance USD (BUSD) stablecoin were classified as securities—a claim that Binance has contested.
As of the latest update, BNB has plummeted over 15% to $260 from $310 on June 4, based on data from CryptoSlate.
$200M liquidation
If BNB’s price continues to decline, $204.2 million would be liquidated on the decentralized finance (DeFi) lending platform, Venus.
Source: DeFillama
DeFi researcher Ignas described the current scenario as “the single largest potential liquidation in all DeFi that cannot be closed.”
He clarified that the possible liquidation event stemmed from an exploit in October 2022, where an attacker took advantage of a vulnerability in the BNB cross-chain bridge to mint 2 million BNB tokens.
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Nine hundred thousand stolen BNB tokens were used as collateral on Venus, which facilitated the borrowing of other assets from the protocol—effectively laundering a considerable portion of the stolen funds.
Binance suspended the BNB Chain and upgraded the network to lessen the repercussions of the exploit.
Blockchain analytics firm Messari noted that the liquidation could potentially trigger cascading adverse effects on the BNB price and users of the BNB Chain. Consequently, VenusDAO has designated BNB Chain as the exclusive liquidator of the position.
Ignas indicated that this action would help stabilize the market as “BNB Chain will use their own money to liquidate (close) the position.”
Binance regulatory troubles
On June 6, the SEC sought to freeze the assets of its U.S. subsidiary, Binance US.
Additionally, Binance US recently revealed plans to shift to a crypto-only exchange after its banking partners opted to cease its USD payment channels.
The platform has asserted that it will mount a defense in court.
The post Past exploit threatens $200M liquidation if BNB falls below $220 appeared first on CryptoSlate.
