As a seasoned analyst with over two decades of experience in the financial markets under my belt, I have seen my fair share of market ebbs and flows, bull runs and bear markets. In that time, I have developed a keen eye for spotting trends and patterns that may not be immediately apparent to less experienced observers.
Between October 10th and 11th, the native token of BNB Chain, referred to as BNB, experienced a 4.1% increase. This upward trend suggests resilience after briefly touching the $555 support level. Notably, since July, the price of BNB has remained relatively steady despite a 15.6% drop in the broader altcoin market. As a result, BNB currently ranks as the third-largest cryptocurrency, boasting a substantial $15 billion market capitalization edge over Solana (SOL).
Activity in BNB Chain has been falling, and this could spell trouble for BNB price
Over the past week, there has been a 37% decrease in Ochain activity on BNB Chain, causing unease among investors regarding the long-term viability of BNB’s recent success. Investors are cautious because Ethereum’s layer-2 solutions for scaling seem to be growing in popularity, especially after the introduction of the Base network. This new platform allows for rapid and incredibly affordable integration with Coinbase, a prominent U.S. exchange and Web3 wallet provider.
One could make a case that Binance Coin’s (BNB) value is partially influenced by the advantages of the Binance exchange, such as exclusive access to launchpads and trading fee reductions. This might lessen the necessity for BNB usage within the BNB Chain itself. However, beyond network transaction fees, BNB plays a significant role across various applications in the ecosystem, including decentralized apps (DApps), trading, staking, yield farming, real-world assets (RWA), lending, launchpads, gaming, and derivatives markets.
To determine if transactions on the BNB Chain truly impact the price of BNB, it’s crucial to analyze onchain deposits and transaction fees as important benchmarks.
As an analyst, I’m observing that as of now, the Total Value Locked (TVL) on BNB Chain stands at approximately 8.1 million BNB, which is relatively unchanged from two months ago. However, I’ve noticed a substantial decrease in network fees. In fact, the total fees accrued for the week ending October 7th reached their lowest level in over four years, amounting to around 1,880 BNB. This represents a significant drop of approximately 56% compared to the previous week’s accumulated fees.
The main reason for the drop in fees is likely due to a significant decrease (25%) in the number of transactions on BNB Chain’s Decentralized Applications (DApps), which might be a cause for concern regarding the future price trend of BNB. Among the notable underachievers are PancakeSwap and Uniswap, which experienced weekly volume drops of 25% and 22%, respectively. Meanwhile, Ethereum DApps saw a smaller decrease (9%) in volume over the same period, according to DefiLlama, while Solana recorded a 15% drop in overall on-chain activity.
Looking at deposit amounts, Ethereum’s Total Value Locked (TVL) remains steady at approximately 19.2 million ETH, as it was two months ago. On the other hand, Solana’s network TVL has skyrocketed to 40.9 million SOL, a level not seen in two years, representing a 26% growth over the past two months. In summary, BNB Chain’s activity has grown at a slightly slower pace compared to its competitors, which might suggest that the recent outperformance of BNB against the broader altcoin market may not be entirely justified.
How sustainable is the Binance Launchpad?
Enhancing the reasons that might cap BNB‘s price growth, there has been considerable backlash regarding Binance’s listing fees. As per Arthur Hayes, co-founder and ex-CEO of BitMEX, it is alleged that token issuers must purchase and keep approximately $5 million worth of BNB while also distributing up to 16% of the token total.
Ignas, the co-founder of Pink Brains DeFi Creator Studio, suggests that Ethereum layer-2 Scroll could have launched its token through a decentralized launchpool, allocating just 5.5% of the supply for liquidity incentives. This approach could have boosted ecosystem activity and eventually compelled major centralized exchanges (CEXs) to list the token voluntarily. Ignas argues that paid CEX listings rarely create incentives for long-term holding.
Amid these criticisms, other market analysts have voiced concerns about the poor performance of recent token launches on Binance. Notably, Hamster Kombat (HMSTR), Catizen (CATI), and DOGS experienced significant negative price action, according to X user ZerebusX, who remarked, “This isn’t the Binance we know, and it’s not what CZ wanted Binance to be.”
As a result, the future price of BNB can be affected by the low level of activity on the BNB Chain and general opinions about Binance’s exchange services, particularly its launchpad initiatives.
This piece serves as a source of general knowledge and isn’t meant to provide legal or financial guidance. Any perspectives, ideas, or opinions shared within this article belong solely to the author and may not necessarily align with the views or standpoints of CryptoMoon.
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2024-10-13 19:10