March 27, 2024
Venus and BNB Chain Join Forces to Prevent Catastrophic BNB Price Crash Amidst $30 Million Liquidation Event
Altcoins News

Venus Protocol Liquidation: $30 Million in Stablecoins Tempers BNB Price Drop

For the second time in less than a week, a significant liquidation event unfolded, potentially averting abrupt crashes in BNB prices. An infamous wallet that had borrowed more than $150 million in stablecoins from the Venus Protocol lending and borrowing platform found itself liquidated, amounting to over $30 million, as the value of the Binance Coin dropped to $209 today. 

In a proposal passed in 2022, where BNB Chain was appointed as the sole liquidator of the BNB Chain exploiter address, Venus said, “As market is very volatile, there is a potential risk that if liquidated, this large portion of BNB may cause more cascading liquidations effect and unnecessary damage to the market and cause more risks to Venus, Venus users, BNB token and BNB Chain.” It also explained by saying, “We will work with Binance and other BNB Chain Ecosystem players to take over the position in case it hits the liquidation line, by repaying the debt in a joint effort. The stability and fund coverage of Venus will be put at the high priority.”

The BNB Chain developer team appeared to have manually executed the liquidation of over 6.89 million Venus BNB (vBNB) tokens, valued at $30 million. This move aligned with a governance vote that took place in November 2022. Liquidation involved the forceful closure of a trader’s leveraged position by an exchange due to a partial or complete loss of the trader’s initial margin. This action is taken when a trader fails to meet the margin requirements for a leveraged position or lacks sufficient funds to maintain the trade.

This liquidation followed a similar incident from the previous week, where the exploiter’s loan worth $60 million was liquidated across two transactions. The Venus Protocol operates on the BNB Chain network and holds a pool of various tokens, of which users have borrowed around $480 million out of a total of $620 million.

Among the borrowers is a wallet linked to the notorious exploiter of the BNB chain. This individual had pilfered over $100 million in BNB tokens by exploiting a bridge tool for inter-network token transfers within the BNB Chain ecosystem. Subsequently, the attacker used the Venus lending protocol to secure a massive $150 million stablecoin loan. However, due to the steady decline in BNB prices over the past year, the enormous loan was on the verge of liquidation. This could potentially trigger a rapid downward spiral in BNB prices as the token gets sold on the open market to cover the debt.

Such a collapse could have profound implications for the decentralized finance ecosystem, valued in the billions, that has been established on the BNB Chain network. To avert this scenario, Venus and BNB Chain have collaborated to preemptively prevent such actions.

Image by Pixabay

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