I'm not suggesting you're wrong, but would you care to clarify how exactly binance being "in dire straits" (in the sense of not being able to honor withdrawals, I presume you mean) would affect the value of BNB?
They could defend the price pretty easily by rigging the price on their exchange by printing BUSD to buy BNB.
I will be shocked if we don't find proof they've done this in the past.
You can do this w/o screwing customers.
Let's assume that some percentage of BUSD is legit (likely a lot of it is).
This means BUSD has some value. Let's say everytime someone converts real money to BUSD - Binance spends 100% of treasuries and then an additional 10% to buy BNB.
They can keep that 10% in their own wallet - and if the value of BNB someone goes to $0 with them playing this game - they can just wipe that account out. They still have all the treasuries to pay their real customers.
However, if you're doing fraud - you're probably doing a lot more of it than this... So you probably won't be able to pay out your customers, because you probably blew all their money on coke and hookers like FTX and every other crypto company so far.
Actual BUSD is issued on Ethereum by Paxos, which is a separate US company that is licensed and regulated by NYDFS. I think it’s unlikely that any of this issuance is fraudulent. Binance then maintains a “pegged BUSD” token on the BNB chain (and other chains.) This is supposed to be backed “1 to 1” by Real-BUSD held in a Binance wallet on chain. They could break this peg at any instant they chose, but it would be visible. I did the math a few days ago over here [1] and it checked out. I’m posting this not to say the situation isn’t risky, just that it seems risky in a highly-transparent way - ie, I can’t see how they would manufacture BUSD without someone noticing. Maybe there’s a loophole I don’t see.
Yes, my poetic license path is very heavy withdrawals -> bank run -> dire straits (money for nothing pun).
$60B in assets, $8B in withdrawals. Even if all the assets are correctly valued, I don't anyone would envy their position. But given their own coin in holding in there, maybe they are devoting some money to defend it, or maybe they are actually in decent shape and can handle this quasi bank run.
More succinctly, if they were really toast, then $BNB would be cratering. Given it's holding in there, it seems they are OK (at this very instant in time).
Collapses often happen very gradually (in a time span relative the the majority proportion of the collapse) and then all at once.
As such, its failure to collapse as the crisis continues is not strong evidence that it’s not toast. Consider the examples of any system subject to cascading failures. But neither is there sufficient evidence to determine if it’s in the early stages of a death spiral.
What seems clear to me is that it’s unlikely to improve in value in the very short term, and might indeed collapse, so it could be prudent to transfer assets out while there’s still liquidity to do so especially in light of recent collapses. Of course this has the downside of accelerating or even making a collapse a self-fulfilling prophesy: that’s inherent to the nature of any asset where user confidence is a tent pole of stability.
It is also why traditional finance has evolved mechanisms to have lenders of last resort so that there is no death-spiraling perverse incentive to get your money out early in those situations. But that sort of back stop takes truly massive resources that need to dwarf those of the potentially failing organizations, which is why you see nation-states filling the role. It may take a nation issuing debt against the guarantee assets of a $trillion+ GDP (and really the taxation ability that comes with, though even that oversimplifies things…) in order to back stop and perform that role for organizations on the scale of many $Billions.
Well it has lost about one quarter of it's value VS Bitcoin in the past 3 weeks. Whether or not that fits the definition of cratering is up to the individual.
