BNB-Bitcoin Ratio Drops to Six-Month Low on Paxos-BUSD Drama
BNB, the initial token of the Binance-initiated blockchain network BNB Chain, is losing ground against bitcoin (BTC) in the wake of regulatory action against Binance-branded dollar-pegged stablecoin BUSD.
The BNB/BTC ratio listed on Binance, the world’s largest exchange by trading volume, fell to 0.01257 early Tuesday, hitting its lowest since August 2, 2022.
The pair has fallen nearly 13% after the US Securities and Exchange Commission (SEC) said last Tuesday that it is suing Paxos for violating investor protection laws by issuing BUSD, which the regulator considers an unregistered security. The SEC action was accompanied by an order from the New York Department of Financial Services (NYDFS) asking Paxos to stop minting BUSD.
“The BNB token has underperformed the broad market in February as the Paxos-BUSD situation continues to weigh on the exchange, which saw massive outflows last week,” Paris-based Kaiko said in a weekly report. “The BNB to BTC price ratio, which measures the relative performance of the two tokens, fell to its lowest level since August 2022.”
The flow of money out of BNB, once referred to as a safe havenand into bitcoin perhaps stems from the belief that the regulatory crackdown on BUSD is actually a move against Binance.
While BUSD is issued and redeemed by Paxos, the stablecoin is marketed by Binance. In September last year, Binance delisted USD coin (USDC), Paxos dollar (USDP) and trueUSD (TUSD) for BUSD.
“Since the NYDFS and SEC specifically called out Paxos for its BUSD product and not the Pax Dollar, it is possible that the enforcement is more about specifics involving BUSD than a broad attack on stablecoins in general,” Galaxy Research’s Alex Thorn said in a note to clients on Friday. “This indicates that these agencies are specifically targeting Binance rather than stablecoins in general – at least at this point.”
If that’s not enough, the SEC and NYDFS agree with Binance’s recent decision to suspend dollar transfers and its admission of compliance gaps. The stock exchange now expects fines for previous offences.
The relationship peaked in November when the collapse of Sam Bankman Fried’s exchange led to increased scrutiny of Binance and other crypto exchanges.
“BNB had largely outperformed BTC until November 2022, when the ratio began to trend downward as sentiment deteriorated following the collapse of FTX,” Kaiko said, adding that the token can be interpreted as a proxy for exchange performance.
According to some observers, BNB/BTC’s slide represents peak pessimism, often observed at market bottoms.
“Buying BNB here. Think we are close to peak FUD [fear, uncertainty and doubt] and the BNB/BTC ratio shows it,” crypto hedge fund Ouroboros Capital said in a tweet thread last week, drawing attention to Binance’s growing market share and growing BNB Chain ecosystem.
