BUSD Risk for Crypto Market

by Feb 14, 2023DEX/CEX0 comments

Binance became unstable! The US Securities and Exchange Commission is prepared to sue Pexos. This company publishes Binance currency, and as a result of the public news, this organization has halted the production of BUSD risk (Binance dollars). The US Securities and Exchange Commission has recently filed a lawsuit against Binance’s stablecoin, Binance USD ($BUSD), referring to the asset as an “unregistered security.”

BUSD’s issuing company, Pexos in New York, halted issuing the currency due to this information, and users will now only be able to redeem their BUSD. As the news spread, talks concerning this asset in the relevant social media platforms significantly surged. This led to a psychological environment of FUD (fear and doubt) in the market, which caused many traders to exchange their Binance stablecoins for lowering their risk.

BUSD Mechanism

Since the BUSD price adjustment mechanism keeps it consistently in the $1 area, it is expected that this stablecoin will undergo a slight and negligible decline when the news is announced. Despite having a smaller market cap than Tether and USDC, Binance Stablecoin is still a viable option for consumers of digital currencies because of the backing of the biggest exchange in the world. If the SEC lawsuit is successful and moves on to the implementation stage of the legal process, I believe it will raise a lot of worries in the market, which should exercise caution. It is evident from the data that the Binance stablecoin’s whales and sharks swiftly removed this asset from their wallets and that they have seen accumulation versus the other three stablecoins (Dai, USD Coin, Tether).

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Looking at the Data

Since December 22, 2022, the growth in BUSD supply on exchanges has increased to its maximum level. Changes of this nature are often only made to exchanges when investors and traders are reluctant to sell assets all at once. Of course, as expected, BUSD risk was not the only victim of this SEC case. Due to the news, Binance coin BNB also saw significant price swings, falling 8.2% in the most recent day to around $290, which is predicted to approach support levels if the negative sentiment against Binance and this news persists. It will also technically fall. Most traders placed short positions on Binance Native Token over the last day on most exchanges, and Binance Native Token had its most sour sentiment week since July 2021.

Naturally, it should be emphasized that the SEC has filed numerous reports against digital currencies in recent years, the most significant of which is the Ripple case, which briefly caused price changes due to panic and fear at the time it was reported. Since traders and investors concentrate more on today’s and tomorrow’s economic data, this incident will only have a temporary impact. As a result, it is anticipated that Binance will soon resume operations as usual. If Binance’s problem with this challenge is not resolved, it may become problematic, depriving it of a strategic and reliable product and raising the danger of its commercial operations.

No Stablecoin is Stable

Dai and USDC are less risky stablecoins than BUSD risk, but no stablecoin is stable right now! From this point of view, the United States and other international financial and monetary institutions will behave more strictly in 2023 regarding regulating and monitoring digital currencies. As a result, the market for crypto assets may occasionally experience brief declines due to these kinds of news. So It is advised that traders create their trading strategies to protect them from these unpredictable swings.

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