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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.

By Oliver Knight
Updated May 9, 2023, 4:08 a.m. Published Feb 22, 2023, 2:18 p.m.
(Cryptowatch Desktop)
(Cryptowatch Desktop)

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.

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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.

On-chain DataBUSDStablecoinBinance
Oliver Knight

Oliver Knight is the co-leader of CoinDesk data tokens and data team. Before joining CoinDesk in 2022 Oliver spent three years as the chief reporter at Coin Rivet. He first started investing in bitcoin in 2013 and spent a period of his career working at a market making firm in the UK. He does not currently have any crypto holdings.

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