On Wednesday morning, Binance Dollar (BUSD), the third-largest stablecoin by market value, abruptly dropped to $0.20 versus the DAI stablecoin. According to Coindesk, this happened as liquidity on the Binance cryptocurrency exchange decreased.
A single market sell order worth $647,000 caused the price to fall, which set off a series of slippages until it reached the $0.20 mark. But as soon as arbitrage traders took advantage of the situation and bought BUSD for less than $1 on Binance and sold it for $1 on another exchange, BUSD swiftly restored its peg on Binance against DAI.
There are currently $3.38 million worth of combined sell orders that are priced between $0.20 and the $1 peg. So, based on Binance's order book, it would require a $3.38 million market sell to return the price to that level.
The New York Department of Financial Services (NYDFS) has ordered Paxos to stop issuing the stablecoin, posing a regulatory hurdle for BUSD this week. Over time, this action will eventually cause the supply of BUSD to decline.
On February 21, Paxos published a statement from its CEO, Charles Cascarilla, detailing the company's failed Binance USD stablecoin and stating, "We Think Unequivocally that BUSD is Not a Security."
