Over $200 million of BNB (Binance Coin) is at risk of liquidation as the altcoin price approaches $219. However, the BNB Chain and Venus Protocol teams have developed plans to address the situation and mitigate its potential impact. Here are the details…
There is a huge liquidation risk for altcoin BNB
According to data tracked by Coinglass, the number of unfinished and active futures contracts linked to open interest or Binance’s BNB token continues to increase. Total open interest rose to 1.57 million BNB ($360 million) today, reaching the highest level since January 1st. This figure has increased by over 8 percent in the last 24 hours, and by about 27 percent in a week. The market price of BNB dropped to $221 early Monday. Thus, it almost matched the lowest recorded on 12 December. Prices have dropped more than 25 percent since the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Binance on June 5.
Along with the decrease in altcoins, the increase in open positions indicates an increase in short positions or bearish bets. This confirms the downtrend. Negative funding rates in the permanent futures market also indicate a downward trend. Funding rates express the cost of holding a long bull or short bear position in the market. Negative odds indicate that bearish shorts are willing to pay bullish longs to keep their price-negative bets open.
What’s the latest on Venus Protocol?
“BNB is very exposed right now because Venus Protocol has a chain liquidation of around $220 which could lead to a cascade,” said Dubai-based crypto analyst and trader Reetika Malik. Venus Protocol is an algorithm-based money market system on the BNB Chain. Venus Protocol recently tweeted, perhaps to calm the nerves in the market. This impasse stretches back to October 2022, when attackers targeted the BNB Bridge, sending more than 924,000 BNB (equivalent to $200 million) as collateral to the Venus Protocol to borrow USDC. According to data from Venus, this position would be liquidated if the BNB price fell below $219.76.
Theoretically, when a position is liquidated, lender protocol is required to sell that position to repay the lender. In the case of a $200 million BNB position facing liquidation, direct selling of such a large amount in the decentralized market could potentially result in a significant drop in the coin’s value. According to CoinGecko, selling $2 million worth of BNB on Binance could lead to a 2% drop in the price of the coin.
What are Venus and BNB’s plans?
Currently, BNB is trading at $226, just $6 above the liquidation price. This aroused fears in the community that the BNB price could drop further after the position was liquidated. As reported by @whale_alert on June 12, more than 63,000 BNB (equivalent to $14.5 million) was transferred back to the Binance exchange. Despite the concerns, the BNB Chain and Venus Protocol teams have come up with plans to overcome this situation.
https://twitter.com/whale_alert/status/1668086390494461952
In November 2022, Venus approved VIP-79, a proposal from BNB Chain, giving the organization the right to liquidate the position of the attacker behind the BNB Bridge incident. Venus’ Discord channel manager Dominik confirmed that the BNB Chain team will take over the position and gradually liquidate it to ensure it does not affect the coin’s price. The BNB Chain team will simultaneously assume the position and repay the debt to Venus Protocol, collaborating with Binance and ecosystem members.
As we reported on cryptokoin.com, BNB has experienced a significant drop recently following the SEC’s allegations of securities law violations against the Binance exchange. According to TradingView, the price of BNB fell nearly 30 percent last week, from $317 to $225.
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