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On April 1, a scandal at the cryptocurrency exchange Binance caused significant turmoil in the market. Low market-cap altcoins listed on Binance experienced severe losses, with the coin Act I The AI Prophecy (ACT) plummeting by over 63% to just $0.06987 in a single day. This drastic downturn triggered massive liquidations among various altcoins on Binance, sparking panic among traders. Reactions grew on social media, leading to the trending hashtag #BinanceBoykot, prompting an official response from the exchange.
ACT and Other Binance Altcoins Suffer Sharp Declines
The steep drop in ACT’s value also affected numerous other altcoins listed on Binance. Altcoins such as DEXE, KAVA, HIPPO, TST, LUMIA, and QUICK saw declines exceeding 50% within 24 hours. On-chain data revealed that Binance made an abrupt decision to reduce the leverage ratios on the affected altcoins. This led major players, including market maker Wintermute, to have their existing positions exceed limits, triggering automatic liquidations.
Wintermute’s CEO, Evgeny Gaevoy, asserted that the events were not a deliberate move but rather a market reaction to an arbitrage opportunity that emerged within an Automated Market Maker (AMM) pool. In contrast, Binance co-founder Yi He stated that another actor was involved, complicating the situation further. While a detailed report has yet to be released, the incident has resulted in serious financial losses.
Binance Responds to the Crisis
Following the upheaval, Binance issued an initial statement indicating that substantial user transactions significantly influenced the sharp declines in altcoin values. Preliminary investigations revealed that three VIP users sold approximately $514,000 worth of ACT on the Binance spot market. Additionally, a non-VIP user transferred a large amount of ACT, executing a sale valued at around $540,000.
These sales triggered automatic liquidations of positions in ACT futures, leading to a domino effect that caused other low market-cap altcoins to decline. Binance emphasized that the total supply of ACT coin is in circulation and that they cannot intervene in users’ selling behavior, while a thorough investigation of the situation is ongoing.
The exchange also stated that it regularly updates leverage ratios based on market conditions and confirmed that such an update had occurred for the ACTUSDT trading pair without any anomalies. Binance highlighted the importance of market makers and mentioned that they are working on programs to encourage more participation from market makers.
