BNB Investors Are Still Ignoring Risks And Red Flags

June 1, 2021 04:00 PM
Crypto Story of the Day

Crypto Story of the Day




Crypto was unchanged this morning. The balance of ETH deposited in the Ethereum 2.0 staking contract has surpassed 5 million ETH, or roughly USD 12.8 billion.

Crypto Story of the Day

Over the past month, Binance Smart Chain (BSC) DeFi venues have seen an increased rate of exploits. Binance Coin (BNB), the network’s native token, has seen its market cap fall by about 50% since making record highs at the beginning of May.

On Saturday, BSC’s official twitter account tweeted: “There are >8 #flashloan hacks recently, we believe, well organized hackers are targeting #BSC now. It is [a] very challenging time for the BSC [community].” 

These hacks, which typically involve exploiting technical loopholes in smart contract code, include an attack on PancakeBunny which resulted in the loss of a reported USD 200 million. Most recently, this weekend Belt Finance suffered a hack resulting in the reported loss of USD 6.2 million USD. 

According to Binance-sponsored DefiStation, the total value of capital deposited in BSC DeFi smart contracts reached a record high of USD 51.9 billion on May 9. This period corresponded with record usage metrics for BSC, according to blockchain explorer BscScan. For example, the number of addresses active as senders or receivers on the network reached a reported 1.2 million in mid-May; Ethereum’s record high for the same metric is 794,000, which was achieved on May 9. 

The value of locked capital has since fallen by about 65% to USD 18.8 billion. Google search data indicates that over the past 30 days, searches for “pancakeswap,” BSC’s most popular trading venue, topped searches for “uniswap,” Ethereum’s largest decentralized venue. References to hacks or exploits weren’t present in tweets containing the words “binance” or “bsc” over the past 2 weeks. 

BNB, dual-purposed as BSC’s native token and Binance’s exchange token, saw losses over the past 2 weeks similar to other exchange tokens. For example, Bitfinex’s LEO token lost USD 2.5 billion of its record USD 3.7 billion market cap. FTX’s FTT token is also roughly 50% off record highs from early May. Earlier this month, Bloomberg reported that Binance is under investigation by the U.S. Justice Department and IRS. 

Crypto investors have repeatedly ignored obvious technical red flags in the past. Examples include overlooked technical issues with Stellar in May and a range of 51% attacks on Ethereum Classic last year with seemingly no selling pressure.

A selloff of BNB that’s largely in line with other exchange tokens, which aren’t facing the same challenges, suggests that BNB investors have ignored the widespread risk posed by DeFi hacks and U.S. investigations into Binance.

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