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On Wednesday, Binance CEO Changpeng Zhao (CZ) acknowledged a relatively unknown X (formerly Twitter) user for clarifying rumors about internal disorder at Binance, which implied that the exchange was urgently liquidating its Bitcoin reserves to stabilize the price of its native token, BNB.
The speculation was linked to a precarious BNB collateralized DeFi loan on the Venus protocol that was nearing liquidation this week.
Is BNB in Trouble?
According to @zkHopium, the loan in question originated from the BNB Chain’s 2 million hack in October 2022, during which a hacker generated 2 million BNB (valued at $600 million at the time) out of thin air.
The hacker subsequently deposited 900,000 stolen BNB into Venus, borrowing $150 million in USDT and USDC stablecoins. This situation theoretically places those assets at risk of liquidation if BNB’s price were to plummet significantly, potentially leading to a substantial market crash for BNB.
In response, Venus designated BNB Chain as the exclusive eligible liquidator for the loan, which has since repaid 90 million USDT of the loan amount.
However, liquidation continues to pose a risk. Based on zkHopium’s assessments, the loan’s liquidation threshold stands at $196, at which point liquidators can generally liquidate 50% of the collateral. BNB’s current price is $217.
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Should this scenario unfold, the analyst expresses skepticism that a large volume of BNB will actually inundate the market.
“As BNB Chain is unlikely to market dump seized collateral (some rumored to say they may even burn the BNB), there will not be $200m+ BNB flooding the market in a liquidation scenario,” the analyst stated.
Is Binance Involved?
Hopium also contended that Binance probably did not finance BNB Chain’s latest loan repayment, considering that the exchange and blockchain network operate as distinct entities. It is even less likely that Binance would liquidate its BTC holdings to facilitate such funding, given that the exchange claims to generate $12 million in annual revenue.
In response, CZ noted that hypothetically selling $30 million in BTC to support the loan would not have been sufficient to influence Bitcoin’s price this month. “That’s less than 0.001% of BTC daily trading volume,” he remarked.
He further suggested that the “influencers” advocating such theories might be doing so merely for engagement purposes, aiming to profit from it.
In July, CZ refuted claims that a series of executive departures from Binance was connected to any internal turmoil regarding legal issues.
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