Is BNB About to See a Massive Liquidation Cascade Event? | $200m On The Line
News broke just 2 days ago that the SEC filed charges against Binance for illegally operating in the U.S. They also included a bunch of filings about how Binance misled customers and openly told people to use a VPN to access their exchange.
1 day later (yesterday), the SEC announced actions against Coinbase.
Today, another news story broke that the SEC is seeking to freeze Binance.US assets to "protect customer funds".
All of this news is stacking up against Binance. This is all not great for the BNB token, which is now down 8%.
Back in February, $200M worth of BNB was added to the Venus protocol and this could be a liquidation event if the price of BNB drops from $260 (current) to $225.
Let's unpack the news events and then talk about this potential BNB liquidation event.
Crypto Exchanges Under Attack in the U.S.
It is no secret that exchanges are being attacked by the SEC. I tend to stand somewhere on the side of Coinbase where they have said (I'm paraphrasing) that the SEC is attacking crypto exchanges on an enforcement-only basis.
Enforcement-only basis means that the SEC isn't providing clear guidelines for how companies can be compliant.
They are simply coming after these companies. There is no warning. There is no collaboration. There is no rule setting and rule breaking.
Can you break rules if there are none?
Gensler's SEC was asked numerous times - recently in a congressional hearing - to provide clear guidelines on which cryptos are a security as well as their compliance expectations.
No answers were provided.
Instead, Gensler planned an attack on the backend to simply enforce rules that he never laid out to anyone. The charges filed by the SEC are a clear indication of this enforcement-only approach. At no point in history did these subjects / guidelines get publicly discussed.
Agencies are here to protect users and customers. This is what I want. Crypto needs this. Our industry is laden with fraud and scams.
It's a GOOD thing to have regulation.
But what the SEC is doing is not regulation, it is enforcement. Regulation implies that there are rules to follow and if you don't follow them, you get enforcement actions. What's happening now is a clear attack to the industry.
I recently listened to a podcast that explained only about 15% of trading volume in crypto is done within US borders and this has been exponentially decreasing.
Transaction volume and industry activity / innovation is being moved overseas. I believe that the U.S. has a unique opportunity to change the tides and start accepting innovation and profiting from it through taxes and other means.
I am a firm supporter of good regulation. That's not a popular thing to say in crypto, but I said it. What we're seeing now isn't even bad regulation, it is no regulation at all. I hope this song changes before 100% of trading volume and activity leaves the U.S.
Liquidation on BNB?
Some people are curious if there is a liquidation event coming for BNB.
This is not an impossibility. Frankly, I think Binance has been the target of a lot of FUD and while the metrics are there that show if the price of BNB hits $220, we'll see a $200M liquidation on BNB tokens, there are some key things preventing this.
- Binance has typically battled FUD with incredible effect
- This $200M BNB that is to be liquidated was voted over to BNB Chain as the sole liquidator
What #2 means is that the Venus DAO ran a proposal post-hack of the BNB bridge and this BNB can only be liquidated by BNB Chain itself.
I am optimistic that they wouldn't go out and damage the market. CZ and Binance have taken such actions in the past to "prop up" the BNB price in similar scenarios.
So overall, I am not buying into this FUD. I do think this is generally negative for Binance on a global scale but I also don't think BNB is going to come crashing down.
What are your thoughts? Drop a comment below!
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