BUSD Stablecoin Temporarily Plunges to 20 Cents on Binance
The stablecoin – which currently finds itself in the middle of a regulatory tussle – immediately regained its $1 peg.
Binance USD (BUSD), the third-largest stablecoin by market cap, quickly dropped to a low of 20 cents against the DAI stablecoin on Wednesday morning as liquidity dried up on the Binance crypto exchange.
The plunge was triggered by a single $647,000 market sell order, which prompted a cascade of slippage down to 20 cents. BUSD immediately regained its peg on Binance against DAI as arbitrage traders could feasibly purchase it for below $1 on Binance and sell for $1 on another exchange.
At press time, there are $3.38 million in aggregated sell orders down from the $1 dollar peg to 20 cents, meaning that it would require a $3.38 million market sell to again take price to that level, according to Binance's orderbook.
For Wednesday's $647,000 sell order to trigger a move to the downside of that magnitude meant liquidity was either pulled from the book shortly before the sale was made, or a pricing error failed to account for resting buy orders.
BUSD has been embroiled in a regulatory tussle after the New York Department of Financial Services (NYDFS) ordered Paxos to stop issuing the stablecoin, a move that will see BUSD supply trend towards zero over time.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.