For the past few weeks, Binance‘s native token Binance Coin (BNB) has seen a fantastic performance. While the whole cryptocurrency market was and still is struggling.
BNB has recently acted as a safe haven, giving investors nice returns during these difficult times. A long time ago, when everyone was wild on Bitfinex, we pointed to Binance as the Bitfinex Killer. Let´s check why this token has recently outperformed BTC and will keep doing so.
What has changed and advanced!? In a word DEFI
Simply put, DEFI happened beyond 2018. The cryptocurrency world is tossed up and churned on through with the new DEFI experience proliferating across the board. It is endless. The absolute expansion in the DEFI space is HUGE! A complete disruption to not only the cryptocurrency space but also to the traditional financial sector in general. They might not see it coming, but finance is going to change forever because of DEFI.
BNB has exploded and in no small fashion. The BNB coin has moved from the $30-$40 range resistance to over $500-$600 range in only a matter of months. Let us ask what is really behind the incredible growth to such a degree? What has caused this meteoric rise in such an extremely short period of time?
Going through this past article, it seems we were spot on with it being not only a safe haven cryptocurrency but also an amazing investment! Binance has done an amazing job to promote and leverage their own BNB token, along with creating a whole Binance DEFI ecosystem, which even leaves the Ethereum DEFI space shaking in its wake.
The DEFI space is wide open. Binance wants to rule it. That is very apparent. They are investing large sums of money back into their ecosystem in order to do this.
What is the purpose of the Binance Coin?
While many companies struggle to give their token a real utility, our BNB is one of those rare examples of a token that has a real use case. Binance Coin comes with a value and a repurchasing Plan.
Basically, the token acts as a payment gateway for paying several fees on the Binance exchange. The major advantage of using BNB is that you can pay your fees. Thus, you receive heavy discounts on exchange fees, listing fees, withdrawal fees, and other fees that might occur, especially for those who trade a lot. Thus, BNB is the perfect solution to save money on fees. Here is an overview of the actual discounts:
1st year: 50%
2nd year: 25%
3rd year: 12.5%
4th year: 6.75%
5th year: no discount
In addition, Binance has installed a so-called repurchasing plan. The company announced that it will use 20% of its platform profits to buy back 100.000.000 BNB tokens (50% of the total supply).
Once Binance has bought back half of its own supply, it will destroy these tokens. Hence, this will increase the value of the remaining supply significantly. While promising to make all buyback actions visible on the blockchain, Binance ensures the highest level of transparency.
Moreover, BNB will act as gas to be spent on its decentralized exchange. This represents a transition from a centralized model to a decentralized model and marks the next big steps for Binance.
BNB outperforms the market
When the whole crypto market crashed back in January, BNB went from almost $25.00 to $6.43 at its lowest point. In the following weeks and months, BNB showed an amazing recovery. Showing a high of $17 on the 18th of June 2018. In terms of Bitcoin valuation, BNB started a tremendous run from mid-May until now (mid-June) despite a decline in the total market cap of the entire crypto market.
Take a look at these two charts- while Bitcoin is obviously in a downwards channel. BNB does the exact opposite and we can observe this behavior quite often.
Today’s drastic drop in Bitcoin below 6k has shown a 10% drop for BNB. But this would lead to short-sighted false conclusions. You don’t want to check each drop and its follow-up reaction by BNB one by one. Instead, try to have a cool-minded view for the long-term. Seeing how hard coins like Cardano’s ADA have been hit in this bear phase. This reveals the real value of holding BNB in tough times.
We are still only 8$ away from the all-time high, which seems to prove our concept of BNB as a safe haven asset. In the general trading world, like FX or commodity trading, we use the Swiss Franc or Gold as a safe haven – these see drops from time to time, but still, they preserve value strongly when times get wild.
What has caused the BNB to run?
The recent spike of Binance’s native token, BNB, has multiple reasons. One reason is that Binance is very active in adding new digital assets to its exchange platform.
Binance has recently listed Siacoin (SC), Streamr (DATA), NEXUS (NXS), SingularityNET (AGI), Quarkchain (QKC), IoTeX (IOTX), Theta Token (THETA), and Civic (CVC). All those listings lead to a spike in trading volume on the exchange and simultaneously to an increase in the use of the BNB token as it gives investors a huge discount on their trading fees.
Besides, as we have pointed out above, using BNB for listing fees also ensures a solid discount for companies that want their token to be listed on the Binance exchange. As Binance is well known to have quite high listing fees (rumors say about a million USD) it may well be assumed that many of the newly listed projects used BNB to reduce the overall costs of the listing fee.
Is it too late to buy BNB?
Even though BNB has seen a 15900% increase in price since it has been available on the exchange, we believe there is still room to grow for BNB. But what could trigger even more growth and make BNB still a solid investment?
The Binance Ecosystem Fund is the key term. Institutional investors are another key term. So, let’s bring both terms together.
1) Institutional Investors
As we all know, we have this narrative in the crypto space that we are waiting for institutional money to come in. Will it come in? Yes, it will. The question is- How will banks and venture capitalists, etc., finally enter the space? The answer is simple: Through ETFs and Index funds. Institutions need a legal framework for their investment, and this is the reason why they are waiting for funds and ETFs that are compliant with regulations. So, an ETF or Index Fund is basically a basket of many assets that allows institutions to diversify and invest huge sums at the same time.
Bottom line: Institutions (big money) need funds to invest in cryptocurrencies.
2) Binance Ecosystem Fund
Binance Labs has recently conducted an online conference with almost 600 institutional investors. One of the major topics, or call it announcements, was a one billion dollar fund. This fund is the first step for institutional money to flow in and use Binance as a vehicle. Right now, there aren’t many details about the fund, so there have been many speculations among the crypto community, especially on how the new fund could affect the BNB token. Binance CEO Changpeng Zhao gave the following statement: “The profit from Binance Labs will eventually flow back to the whole BNB economy and benefit all token holders.”. As you can see, this clearly points out that BNB holders will be highly rewarded for holding the token.
Bottom line: Binance offers institutional money an investment vehicle (fund) that allows them to enter the space.
Conclusion: Binance Coin is a safe haven asset for Crypto
There are many reasons why you should have a good portion of Binance Coin in your portfolio. Let’s collect the major advantages of holding the BNB token:
- BNB has a real utility as it reduces the cost of trading fees (up to 50%)
- Using BNB allows projects to list their coin/token cheaply
- Binance will buy back half of its token supply and destroy it (Significant increase in value)
- New coin listings will increase the trading volume on Binance as well as the use of the token
- Binance Ecosystem Fund allows institutional money (big money) to invest
All those different use cases give the token tremendous value and represent reasons to hold the token long term. Binance is currently the exchange with the highest volume of all cryptocurrency exchanges and there is no reason why this should change any time soon.
As of now, Binance is the way to go for private investors (more investors = more volume = Increase in BNB token value), and it seems like Binance will also be the first exchange that will serve the needs of institutional investors. Even in times when the whole market is struggling, BNB seems to be the one digital asset that acts almost untied to Bitcoin and acts like a safe haven to retail investors. The overall utility makes the token so strong that we do not expect to see a major sell-off anytime soon, so BNB is a solid hold in both bear and bull markets.
Also, more institutional ownership will help the BNB token receive even more stability and less volatility in the long run. In anticipation of fresh capital entering the space, Binance’s volume will experience an exponential increase, which will greatly benefit all BNB token holders.
