Binance CEO Changpeng Zhao (CZ) has addressed accusations of a significant Bitcoin (BTC) selloff by Binance in response to increasing speculation and allegations circulating within the crypto community. These claims came in the aftermath of a 7% decline in the BTC price.
CZ responded on Twitter, sharing a thread by a user named ZkHopium, who provided a detailed analysis that debunked the claims and highlighted the underlying situation.
ZkHopium's thread shed light on the events surrounding the liquidation of Binance Coin (BNB) on the Venus Protocol. It stated that the exploit occurred on Binance Smart Chain (BSC) on October 6, 2022, creating 2 million BNB.
Out of this amount, 900,000 BNB was deposited on the Venus Protocol to borrow USDT and USDC worth approximately $150 million. In response, the BNB chain burned over 2 million BNB, equivalent to around $550 million at the time, effectively removing these tokens from circulation.
To facilitate the liquidation process, Venus Protocol adopted a governance proposal and named BNB Chain as the sole liquidator of the loan. BNB Chain then funded the liquidator's wallet with 30 million BUSD in December 2022, another 30 million USDT in June 2023, and an additional 30 million USDT on August 21, 2023.
The liquidation mechanism of the Venus Protocol includes a security factor or liquidation threshold. When triggered, liquidators can gradually liquidate up to 50% of the collateral and receive an additional 10% of the liquidated collateral as a fee.
ZkHopium's analysis highlights several key factors that make this case unique. Firstly, only one liquidator does not have an incentive to engage in market dumping. Secondly, the liquidations are performed manually without bots involved at the top of the process.
Considering the significant loan volume, it is expected that the liquidation tranches will be well below the 50% threshold.
CZ addressed the allegations and expressed his appreciation for ZkHopium's in-depth investigations. He emphasized that the impact of a $30 million liquidation on the Bitcoin price is "insignificant."
CZ stated that Binance does not sell BTC and that most rewards are given in BNB. He stressed that the alleged fear of a significant impact on the BTC price is unfounded, as $30 million represents less than 0.001% of BTC's daily trading volume.
At the time of writing this article, BNB is trading at $217, as shown in the above chart. However, it has experienced a slight decline of 0.2% in the past 24 hours.
Bitcoin, the largest cryptocurrency by market capitalization, is currently valued at $26,000 and has remained relatively stagnant. After briefly touching the $26,700 mark, it experienced a 2.4% decline.
Despite the current low volatility, Keith Alan, co-founder of research and analytics firm Material Indicators, noted that economic reports released this morning would contribute to the narrative influenced by Jerome Powell's upcoming speech at the Jackson Hole symposium on Friday.
As anticipation for comments by the US Federal Reserve Chairman, Jerome Powell, at the Jackson Hole Symposium grows, the Bitcoin market shows early signs of increased activity.
Keith Alan pointed out that while economic reports may not have an immediate impact on volatility, Powell's narrative during his speech would shape market expectations.
This expectation is likely to lead to increased volatility as the BTC market approaches the weekend. Traders and investors are preparing for potential market fluctuations during Powell's speech, anticipating that his statements could have significant impacts on the cryptocurrency market.
BTC has returned to its established range between $26,000 and $26,200 after briefly touching the $26,700 mark, as illustrated in the chart above.
Featured image from iStock, chart from TradingView.com.
