• BUSD, the third-largest stablecoin by market cap, quickly dropped to a low of 20 cents against DAI on Wednesday morning due to a large sell order.
• The plunge was immediately reversed as arbitrage traders could buy it for below $1 and sell for $1 on another exchange.
• BUSD has been embroiled in a regulatory tussle after NYDFS ordered Paxos to stop issuing the stablecoin.
Binance USD (BUSD) Plunges To 20 Cents
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.
Stablecoin Regains Its Peg Immediately
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.
Market Sell Order Triggers Plunge
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.
Stablecoin embroiled in Regulatory Tussle
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 Data Update
On-chain data showed that at press time there were 3 pieces of data regarding BUSD: Market Cap ($3 billion), Price ($1), and 24 Hour Trading Volume ($154 million).