BUSD falls again; is it stable? Will it collapse like UST?

Binance USD (BUSD) seems to be falling behind in the race for stablecoins that continues to intensify. On CoinMarketCap, it is now ranked 7th behind Tether (USDT) and USD Coin (USDC). While not disastrous, allegations of mismanagement lead users to wonder if this will be another TerraUSD-style collapse (UST).

What happens with BUSD?

On January 10, 2023, blockchain research firm ChainArgos revealed that BUSD needed to be fully supported by reservations. Speaking to Bloomberg, the stock market admitted that maintaining the 1:1 U.S. dollar peg has sometimes been challenging. Binance also explained that the issue was mostly encountered between 2020 and 2021 but has since been fixed.

This is a blow to the stock market because, in December 2022, users had already begun to be concerned about its reserves’ proof. Binance reassured users that its bitcoin (BTC) reserves were “oversized,” but that didn’t stop net outflows of funds from reaching $902 million in 24 hours on December 13.

More recently, other questions have been asked about derivatives of the exchange’s wrapped tokens, known as Binance-peg tokens.

Users have therefore continued to withdraw funds from the exchange, causing BUSD to lose $2 billion in market capitalization since the beginning of the year. All other stablecoins also suffered losses in 2022, but Binance’s was the largest.

READ MORE: Best Time to Invest in Crypto – The Mini Guide to When to Buy Bitcoins

Can BUSD survive this situation?

Binance undoubtedly remains the leading cryptocurrency exchange regarding trading volume, but cracks are starting to appear.

We have already mentioned a few of them above. U.S. prosecutors are also considering filing criminal charges for possible money laundering after blockchain data shows several executives moving a lot of money through the exchange.

If BUSD or Binance collapse like FTX, it will cause a shockwave in the financial markets. Fortunately, this seems unlikely despite the recent unrest, as users still trust the company. So, for now, we don’t expect to see BUSD collapse like UST or Binance like FTX.

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