[Rise Community] After the $200 million BNB liquidation: What will happen next?

Worryingly, more than $200 million worth of BNB (Binance Coin) is at risk of liquidation as the token price approaches the $219 mark. However, the BNB Chain and Venus Protocol teams have plans in place to address the situation and mitigate its potential impact.

The trouble dates back to October 2022, when an attacker targeted the BNB Bridge and sent more than 924,000 BNB (equivalent to $200 million) to the Venus Protocol as collateral to borrow USDC. According to Venus data, the position will be liquidated if the BNB price falls below $219.76.

In theory, when a position is liquidated, the lending protocol must sell the position to repay the lender. In the case of the $200 million BNB position facing liquidation, selling such a large amount directly on a decentralized market could cause the token’s value to drop significantly. According to CoinGecko, selling $2 million worth of BNB on Binance could cause the token’s price to drop by 2%.

Currently, BNB is trading at $226, just $6 above the liquidation price. This has caused the community to worry that the price of BNB may plummet further after the liquidation.

As reported by @whale_alert, over 63,000 BNB (equivalent to $14.5 million) was transferred back to the Binance exchange on June 12. Despite the concerns, the BNB Chain and Venus Protocol teams have already developed plans to deal with this situation.

In November 2022, the Venus project approved BNB Chain's VIP-79 proposal, granting the organization the exclusive right to liquidate the positions of the attackers behind the BNB Bridge incident. Venus' Discord channel manager Dominik confirmed that the BNB Chain team will take over the position and gradually close it to ensure that it does not affect the price of the coin.

He said, “Given the high volatility, if the position is liquidated all at once, it may trigger a cascading effect, causing unnecessary damage to Venus, Venus protocol users, BNB tokens, and BNB Chain. The BNB Chain team proposes to become the sole liquidator to safely manage this situation.”

At the same time, the BNB Chain team will work with Binance and ecosystem members to take over and repay the debt to Venus Protocol.

BNB has recently experienced a sharp drop after the SEC accused Binance exchange of violating securities laws. According to TradingView, BNB's price has fallen by nearly 30% in the past week, from $317 to $225.

Despite the challenges, the collaborative efforts between BNB Chain, Venus Protocol, and other stakeholders demonstrate a commitment to protecting the interests of BNB holders and ensuring the stability of the Venus ecosystem. The outcome of these initiatives remains critical to the future trajectory of BNB and its place in the cryptocurrency market.