• Binance USD (BUSD) briefly dropped to 20 cents against the DAI stablecoin on Wednesday due to a single $647,000 market sell order.
• The plunge was quickly reversed as arbitrage traders could buy it for below $1 on Binance and sell for $1 elsewhere.
• BUSD is currently in the middle of a regulatory tussle with the New York Department of Financial Services (NYDFS).

FinanceBUSD Stablecoin Temporarily Plunges

On Wednesday morning, Binance USD (BUSD), the third-largest stablecoin by market cap, briefly dropped to a low of 20 cents against the DAI stablecoin. This plunge was caused by a single $647,000 market sell order which triggered a cascade of slippage down to 20 cents before being immediately regained its peg on Binance against DAI.

Regulatory Tussle

BUSD has been facing regulatory issues as the New York Department of Financial Services (NYDFS) has ordered Paxos to stop issuing the stablecoin. Consequently, this will lead to a decrease in supply over time.

Liquidity Issues

For Wednesday’s $647,000 sell order to trigger such an extreme move downwards suggests that liquidity had either been pulled from the book shortly before or that there was some kind of pricing error which failed to account for resting buy orders. At press time, there are $3.38 million in aggregated sell orders down from the $1 dollar peg to 20 cents.

Immediate Reversal

The price quickly regained its original level due to arbitrage traders who were able to purchase it for below $1 on Binance and then later sell it for its original price elsewhere.

Conclusion

This event highlights just how volatile and unpredictable cryptocurrency markets can be when they experience drops in liquidity or pricing errors occur. That said, what is most important here is that despite this brief period of instability and volatility, BUSD ultimately returned back under its dollar peg within minutes – showing just how resilient these markets are becoming over time.