Robert Steinadler, 14 days ago
Binance launched a recovery fund for the crypto industry in November 2022 as an immediate response to the FTX crisis. The first round was meant to protect crypto businesses from the fallout and a second one followed to help out miners. Rebuilding the industry came at a cost since this wasn’t a bailout but an opportunity to borrow money from Binance. Now that the dust has settled another crisis needs to be dealt with. Only this time it is not about crypto intrinsic shocks, but banks that are being at risk.
Why did Binance convert $1 billion into BTC, ETH, and BNB? And how did that decision impact the market?
With the recent banking crisis involving the Silicon Valley Bank even crypto companies were affected. Circle reported last weekend that $3.3 billion were stuck with SVB and at that time it wasn’t clear if they would get their money back. This caused USDC to depeg for a few days. Now that the Fed along with the FDIC and the Treasury Department promised to make all depositor whole again, the situation has been resolved. At the time of writing USDC has regained its peg back to $0.9958.
The problems for Binance are not stopping there as their stablecoin BUSD has come under scrutiny by U.S. regulators. With stablecoins facing difficult times and crypto-friendly banks going out of business, the company decided to make a policy shift toward its recovery fund.
It was today when Binance CEO Changpeng “CZ” Zhao announced via Twitter that the $1 billion recovery fund would convert BUSD into native crypto assets. Binance bought Bitcoin, Ethereum, and BNB from the open market.
In response to that decision, Bitcoins price picked up and reached a daily high of about $22,776. This is notable because the NASDAQ 100 and the S&P 500 both lost value at the same time. It is for the first time that crypto and stock indices have decoupled this year. It remains open if this is just a side effect of Binance making moves on the open market or if investors are opting for crypto during what could become potentially a banking crisis.
Bitcoin was designed in response to such a situation and it looks like the Binance CEO believes that opting for solid crypto assets is a viable strategy.
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