Binance Coins. How support for the largest cryptocurrency exchange affects the market

Binance Coins. How support for the largest cryptocurrency exchange affects the market

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Author: Robert Strickland (crypto-journalist)
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Binance Coins. How support for the largest cryptocurrency exchange affects the market
We tell you why the BNB token rate is recovering after a sharp drop and how the landscape of the exchange's promoted stablecoins is changing

The native token of the largest cryptocurrency exchange Binance (BNB) is recovering after a fall. Between June 5 and June 12, the token sank nearly 25 percent, dropping to its lowest level since 2022 after the U.S. Securities and Exchange Commission (SEC) sued Binance and exchange founder Changpeng Zhao.

Among several other charges, the regulator said that BNB is unregistered security and therefore falls under the regulator's actions. According to CoinGecko, the token is the fourth-largest crypto asset with a market capitalization of $37.3 billion.

Market participants have been reacting more closely to news around native cryptocurrency tokens after the collapse of FTT, the token of the FTX exchange, which contributed to its rapid collapse. At the time of publication, BNB is trading at $240, having recovered about 9% in price. The rise in price was probably partly driven by the exchange's statements on each of its negative events.

BNB/USDT
235,01 +3,47 (1,5%)

An unconfirmed theory circulated on social media that Binance is selling its own holdings of bitcoins and stablecoins (cryptocurrencies whose exchange rate is pegged to the dollar) to raise funds to use them to support the price of BNB after the sharp fall. Zhao openly denied the speculation, saying that the exchange had done nothing of the sort and that data about its reserves was publicly available.

The SEC in its lawsuit also accused Binance and Zhao of mismanaging customer funds, misleading investors and regulators, and violating securities regulations. Binance called these actions "disappointing" and said it intended to "vigorously defend" its platform.

Users began withdrawing funds from Binance following the SEC filing and immediately after the action more than $700 million in assets were withdrawn from the exchange. Binance stated that users' assets on the exchange are "secured 1-to-1" and that the site can process any volume of withdrawal requests without any problems. At the time of publication, outflows from Binance are decreasing, with a net inflow of $455 million to Binance at the beginning of the week.

Binance Stablecoins
Stablecoin TrueUSD (TUSD), which was little known before this year, is now the largest asset in terms of trading volumes on exchanges paired with Bitcoin due to active promotion by Binance.

USDT and BUSD bitcoin trading pairs have had the largest share of trading volumes in the last couple of years. They have both enjoyed a zero-commission program on Binance since mid-2022. At the end of March, the leading cryptocurrency exchange brought back the previously waived fees for bitcoin trading but made an exception for the BTC/TUSD pair.

 

This stimulated the demand for this trading pair. Its share in the trading volume on Binance rose to 50% from almost 0% in just a month since the introduction of zero commission.

On June 10, due to problems with the Prime Trust issuer, the TUSD exchange rate was slightly detached from the dollar but regained parity a few days later. After that, its capitalization began to grow rapidly. From June 15 to June 16 alone, the figure rose one and a half times from $2 billion to $3 billion, which could also be attributed to a one-time massive capital flow from USDT to other "stablecoins".

Stablecoin USDT has lost its peg to the dollar exchange rate. Why this is happening

TUSD's market share is still relatively small compared to the biggest stablecoins, USDT from Tether and USDC from Circle. Previously, the top three was stably BUSD, which was issued by the American company Paxos, and which was also growing market share at one time thanks to Binance. However, on June 16, it was overtaken by the DAI stablecoin in terms of capitalization for the first time. Since the beginning of the year, BUSD's capitalization has fallen by more than 70%.

BUSD was launched in 2019 as part of Binance's Project Venus, "an initiative to develop localized stack coins and digital assets tied to fiat currencies around the world." The coin was branded by Binance and positioned as the "official" stablecoin of the exchange, although it was issued by a third-party company. BUSD had a relatively slow start and its capitalization did not exceed $200 million for a few months but rose sharply at the end of 2020.

As with TUSD, Binance offered a series of promotions and bonuses for customers using BUSD, which also attracted users and contributed to the growth of the exchange itself. In 2022, BUSD's capitalization rose to more than $23 billion.

The coin's market value peaked on November 14 at around $23.5 billion, but by the beginning of the year, it had dropped nearly 30%, falling to $16.5 billion. This was due to the general collapse of the crypto market amid the bankruptcy of the FTX exchange. In February, Paxos, which provided the infrastructure for the operation of BUSD in the U.S. banking system, received a subpoena from the SEC, shortly after which stopped the issue of Binance Stablecoin in principle. By that point, BUSD had a capitalization of less than $12 billion. That is, within half a month and a half days, more than half the capital was gone from the coin.

"This is a declaration of war. Why the BUSD issuance ban is a major development

When the SEC filed a lawsuit against Binance itself in early June, the agency equated BUSD to an unregistered security, like the exchange's own BNB token. The market value of the coin started falling again at an even faster pace. Currently, the market value of BUSD is $4.5 billion, that is, the coin has lost 80% of its capital compared to its peak values.

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