This post is also available in:
Português
Over the past few weeks, Binance’s native token, Binance Coin (BNB), has performed exceptionally well. While the whole cryptocurrency market was and still is struggling.
BNB has recently acted as a safe haven, delivering solid 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 being upended and churned as the new DEFI experience proliferates 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 promoting and leveraging 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 tokens real utility, our BNB is one of the few tokens with a real use case. Binance Coin comes with a value and a repurchase 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 substantial discounts on exchange, listing, withdrawal, and other fees, especially for frequent traders. Thus, BNB is the perfect solution for saving 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). As traders seek to capitalize on market movements, effective trading strategies for Binance Futures can significantly enhance their profitability. Understanding market trends and using technical analysis are crucial to crafting these strategies. Additionally, incorporating risk management techniques can help mitigate potential losses in volatile conditions.
Once Binance has bought back half of its own supply, it will destroy these tokens. Hence, this will significantly increase the value of the remaining supply. While promising to make all buyback actions visible on the blockchain, Binance ensures the highest level of transparency.
Moreover, BNB will serve as gas for 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 $17 on the 18th of June 2018. In terms of Bitcoin valuation, BNB started a tremendous run from mid-May until now (mid-June) despite a decline in the total market cap of the entire crypto market.
Take a look at these two charts- while Bitcoin is obviously in a downward channel. BNB does the exact opposite, and we often observe this behavior.
Today’s drastic drop in Bitcoin below 6k has led to a 10% drop in BNB. But this would lead to short-sighted false conclusions. You don’t want to check each drop and its follow-up reaction by BNB one by one. Instead, try to have a cool-headed view in the long term. Seeing how hard coins like Cardano’s ADA have been hit in this bear phase. This reveals the real value of holding BNB in tough times.
We are still only 8$ 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 significant discount on their trading fees.
Besides, as we have pointed out above, using BNB for listing fees also provides a solid discount for companies seeking to list their token on the Binance exchange. As Binance is well known for having quite high listing fees (rumored to be about a million USD), it may well be assumed that many of the newly listed projects used BNB to reduce the overall listing fee costs.
Is it too late to buy BNB?
Even though BNB has seen a 15900% increase in price since it became available on the exchange, we believe there is still room for growth. 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, there’s a 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, venture capitalists, and others ultimately enter the space? The answer is simple: Through ETFs and Index funds. Institutions need a legal framework for their investments, which is 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 recently held an online conference with nearly 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’s been a lot of speculation in the crypto community, especially about how it 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 to 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 provide reasons to hold it long term. Binance is currently the exchange with the highest trading volume among cryptocurrency exchanges, and there is no reason this should change any time soon.
As of now, Binance is the way to go for private investors (more investors = more volume = an Increase in BNB token value), and it seems like Binance will also be the first exchange to serve the needs of institutional investors. Even when the whole market is struggling, BNB seems to be the one digital asset that behaves almost independently of Bitcoin and serves as a safe haven for 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, greater institutional ownership will help the BNB token achieve even greater stability and lower volatility in the long run. In anticipation of fresh capital entering the space, Binance’s trading volume will increase exponentially, greatly benefiting all BNB token holders.
