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 heaven giving investors nice returns during these difficult times. A long time ago, when everyone was wild on Bittrex, we pointed to Binance as the Bittrex Killer. Let´s check why this token has recently outperformed BTC and will keep doing so.
What is the purpose of BNB?
While many companies struggle to give their token a real utility, BNB is one of those rare examples of a token that has a real use case. Binance Coin comes with a value and repurchasing Plan. Basically, the token acts as a payment gateway for paying several fees on the Binance exchange. The major advantage of using BNB to pay your fees is that you receive heavy discounts on exchange fees, listing fees, withdrawal fees and other fees that might occur. Especially for those who trade a lot, 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 they will use 20% of their platform profits to buy back 100.000.000 BNB tokens (50% of the total supply). Once Binance will have bought back half of its own supply they will destroy these tokens which 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 their decentralized exchange which represents a transition from a centralized model to a decentralized model and marks the next big steps for Binance.
BNB outperforming 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 with a high of $17 on the 18th of June 2018. In terms of Bitcoin valuation, BNB started a tremendous run from mid-May until now (mid-June) despite a decline of the total market cap of the entire crypto market.
Take a look at these two charts- while Bitcoin is obviously in a downwards channel, BNB does the exact opposite and we can observe this behavior quite often.
Bitcoin Price Development
Today’s drastic drop in Bitcoin below 6k has shown a 10% drop for BNB – but this would lead to short-sighted false conclusions. You don’t want to check each drop and its follow-up reaction by BNB one-by-one, but try to have a cool-minded view for the long-term. Seeing how hard coins like Cardano’s ADA have been hit in this bear phase, reveals the real value of holding BNB in tough times. We are still only 8$ 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 Francs or Gold as a safe haven – these see drops as well from to time, but still, they preserve value strongly, when times get wild.
What has caused the BNB run?
The recent spike of Binance native token BNB has multiple reasons. One of the reasons is the fact that Binance is very active in adding new digital assets to their 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 of 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 who 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 makes 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 the institutional money to come in. Will it come in? Yes, it will. The questions is- How will banks and venture capitalists etc. finally enter the space? The answer is simple: Through ETF´s and Index funds. Institutions need a legal framework for their investment and this is the reason why they are waiting for funds and ETF´s that are compliant with regulations. So, an ETF or Index Fund is basically a basket of many assets which allows institutions diversification and huge investment sums at the same time.
Bottom line: Institutions (big money) need funds to invest into 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 using Binance as a vehicle. Right now there aren’t many details about the fund so that there were 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:
1) BNB has a real utility as it reduces the cost of trading fees (up to 50%)
2) Using BNB allows projects to list their coin/token cheaper
3) Binance will buy back half of their token supply and destroy it (Significant increase in value)
4) New coin listings will increase the trading volume on Binance as well as the use of the token
5) 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 of 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 assets that acts almost untied to Bitcoin and acts like a safe heaven to retail investors. The overall utility makes the token so strong that we do not expect to see a major sell of anytime soon so that BNB is a solid hold in both bear and bull market.
Also, more institutional ownership will help the BNB token receiving even more stability and less volatility in the long run. In anticipation of fresh capital entering the space, Binance will experience an exponential increase in volume which will highly benefit all BNB token holders.