Binance crypto exchange has announced that it will convert $1 billion in Binance USD (BUSD) to Bitcoin (BTC), ether (ETH), BNB coin (BNB), and other tokens to help the market. The failure of three major cryptocurrency-backed banks, Silicon Valley Bank (SVB), Silvergate Bank, and Signature Bank caused the stablecoin USDC to fall as low as $0.87 from its $1 benchmark.
Binance CEO makes stable plans as bank fears rise
Binance CEO and co-founder Changpeng (CZ) Zhao tweeted on March 13 that, in light of “changes in stablecoins and banks,” the exchange will convert the remaining $1 billion in its Industry Recovery Initiative into “native crypto.”
Afterward, he published links to the transaction hash ID for the BTC and the ETC and stated that $980 million was moved in 15 seconds for a transaction fee of $1.98. The action likely contributed to increased buying pressure.
Monday, during Asian hours, Bitcoin surpassed $22,500, while ether reclaimed the $1,600 market. According to CoinGecko data, BNB rose over 10% to trade over $300, establishing new highs for the past two weeks.
The move came as the crypto market took another hit in the early Asian hours when US regulators shut down the crypto-friendly Signature Bank, adding to the market’s stress.
Regulators shut down Silvergate early last week, followed by the failure of Silicon Valley Bank on Friday night, causing markets to go haywire over the weekend as investors rushed to protect their capital.
The crypto community reacts to the conversion
The majority of the crypto community backed the move, though some questioned why more assets were not considered. However, there is no conclusive evidence that the market will maintain its current value following news of the Silvergate closure and broader market turmoil.
Some praised the decision, calling it “pure gold,” and suggested that stablecoins be pegged to alternative currencies:
However, others questioned the decision to sell BUSD, a supposed stablecoin, and convert it into more “volatile” assets.
Circle, the company behind USDC, disclosed on March 10 that it has approximately $3.3 billion tied up at the failing SVB, which caused the initial de-pegging event. However, by March 13, USDC had returned to its $1 peg and is now hovering around $0.99.
Binance holds over $70 billion in crypto assets
On Twitter, Zhao commented on current events. He assured investors and market enthusiasts that Binance had no relationship with Silicon Valley Bank. The decline of cryptocurrency-focused banks such as Silvergate and Signature Bank has added to market anxiety.
There are concerns about bank runs; crypto enthusiasts advocate moving funds to centralized exchanges. Obviously, this presents several complications. Zhao has even proposed that Binance might buy a bank.
Despite all of the turmoil, Binance has performed well. The majority of the exchange’s assets are Ethereum and BSC, totaling more than $74 billion.
The largest asset held by the exchange is BNB, which accounts for 29.55 percent of its total assets. This is followed by USDT (21.51%) and BTC (15.21%). In addition, 11 tokens were added to its proof-of-reserves (PoR) system, including Dogecoin (DOGE), Curve DAO token (CRV), and 1inch (1INCH).
The USDC’s instability had a domino effect on other stablecoins, including DAI, USDD, and FRAX, which also lost their $1 position.
Since the events began to unfold on March 10, the entire crypto industry has been on edge about what will happen next. Twitter users have asserted that there is no one left to bank crypto companies.
Are stablecoins dying?
In recent months, the crypto world has been shaken by the volatility of stablecoins, leaving many investors wondering whether these digital assets are dying out.
Stablecoins are cryptocurrencies designed to have a stable value, often pegged to a fiat currency like the US dollar or euro. This stability makes them an attractive alternative to traditional cryptocurrencies like Bitcoin, whose value can fluctuate dramatically. However, recent events have cast doubt on their ability to maintain their stability.
One of the most widely-used stablecoins, the USD Coin (USDC), has recently experienced a significant drop in value. This has led to concerns among investors who previously saw stable coins as a safer and more stable investment option than other cryptocurrencies.
This has led some analysts to question whether stable coins are dying out and whether they can be relied upon as a stable investment option in the future. Despite these concerns, some experts argue that stablecoins are still valuable assets for investors and that the recent fluctuations in value simply reflect the wider volatility of the crypto market.
According to some analysts, Stablecoins remain a valuable tool for investors looking to hedge their positions in the crypto market. While they may not always maintain their peg to the US dollar or other fiat currencies, they can still offer a degree of stability that is unmatched by other cryptocurrencies.
However, others remain skeptical about the future of stablecoins, arguing that their recent instability undermines their value as a reliable investment option. As the crypto market continues to evolve and mature, it remains to be seen whether stablecoins will be able to maintain their stability and continue to attract investors.
