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BNB, the native cryptocurrency of Binance, the world’s largest cryptocurrency exchange, has recently experienced a strong upward trend, successfully breaking free from the bear market and achieving an astonishing surge of over 60% in the past two months. What are the key factors that have propelled the price of BNB? What are the catalysts driving the bullish sentiment towards BNB? This article will delve into the analysis and discuss the future development trends of BNB.
Table of Contents:
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The Token Attributes and Use Cases of BNB
Regular Burning of Token Supply
Factors Driving the Recent Surge of BNB
Successive Launches of Launchpool Projects
Settlement with the US Department of Justice
Technological Breakthroughs
Potential Catalysts for BNB’s Bullish Outlook
Increased Trading Volume in the Bull Market
More Releases of Launchpad and Launchpool Projects
Expansion and Growth in New Markets
Web3 Wallets Accelerating the Development of BNB Chain Ecosystem
Introduction of the One BNB Concept: A Multichain Strategy and Vision for Mass Adoption of BNB Chain
Can BNB’s Future Gains Outperform Bitcoin?
The Token Attributes and Use Cases of BNB
BNB was issued through an Initial Coin Offering (ICO) in 2017 and listed on the Binance exchange just 11 days later. The token’s initial trading price was around $0.1, reaching nearly $700 during the peak of the bull market in 2021. BNB is primarily used in Binance’s platform services and the BNB Chain ecosystem.
In Binance’s platform services:
– It can be used to offset trading fees, as holders can activate the BNB discount feature on the platform to receive fee discounts.
– It is used in Binance’s NFT platform, wealth management products, and financial services.
– It is used for payments and donations, such as for online or offline merchants and platforms that support BNB.
– It can be used to participate in token sales on Binance Launchpad and new coin mining on Launchpool.
In the use of BNB Chain:
– It serves as the gas token for the BNB Smart Chain (BSC), Layer 2 solutions opBNB and zkBNB, and transaction fees for hundreds of applications running on these blockchains.
– It participates in BNB Beacon Chain governance.
– It is used in various applications on multiple chains, such as collateralizing or borrowing BNB on the BNB Smart Chain’s DeFi protocols.
BNB permanently removes a certain amount of tokens from circulation through its Auto-Burn system and real-time burn mechanism, reducing the total supply of tokens and creating a deflationary effect. In the quarterly “Auto-Burn,” the amount burned is adjusted based on the price and the number of blocks generated on the BNB Smart Chain in that quarter. The most recent BNB Auto-Burn took place on January 17, 2024, with approximately 2.14 million tokens burned.
Another mechanism for real-time burn is based on gas fees, where a fixed proportion of the gas fees charged in each block is burned. The proportion is determined by BSC validators. According to data from the BNB Chain explorer, the initial total supply of BNB tokens was 200 million, and the current circulating supply is approximately 149 million (indicating that nearly 25% of BNB has been burned). As the goal of the BNB burn mechanism is to gradually reduce the total supply to 100 million (50% of the total supply), there is still room for further reduction in BNB supply, which can help drive the price of BNB higher.
Factors Driving the Recent Surge of BNB
Although Binance officially stated in its BNB introduction article that BNB holders “do not have any ownership rights to Binance’s profits, and investing in BNB does not mean they are investing in Binance,” the market sentiment in the cryptocurrency market is still largely driven by narratives. Therefore, the platform dynamics of Binance often influence the market’s perception of the BNB price, leading to fluctuations. So, what are the factors driving the recent price surge of BNB?
Apart from the market sentiment brought by the Bitcoin ETF, the launch of projects on Binance Launchpool has been the main driving force behind the recent surge of BNB. Binance Launchpool is a new coin mining platform that allows blockchain projects to gain significant exposure and helps Binance users discover various emerging blockchain trends.
The operation of Binance Launchpool allows users to stake their BNB or specific stablecoins into the Launchpool mining pool to receive token rewards for the current project. This enables BNB holders to earn additional income from each Launchpool phase. Data shows that the average annualized return of the latest five mining projects reached 125% (calculating only the BNB pool yield), bringing significant wealth effects to BNB holders.
The price trend of BNB indicates that each release of Binance Launchpool has led to a temporary price increase for BNB, especially during an overall upward market trend or when the current Launchpool project receives widespread attention, BNB tends to continue the upward momentum.
On November 22, in Taiwanese time, the US Department of Justice announced a settlement with Binance, and Richard Teng, who has a senior traditional finance and regulatory background, became the new CEO of Binance. Although the price of BNB briefly dropped by nearly 14% upon the announcement of the settlement, this event seemed to provide an opportunity for a rebound in the BNB price, and in the past two months, the price of BNB has achieved a significant surge of 60%.
The US regulatory agencies did not accuse the exchange of misappropriating user funds or engaging in any market manipulation, eliminating users’ concerns about Binance and strengthening the confidence of BNB holders. Data shows that after experiencing a brief outflow of funds, Binance’s user funds have gradually returned to the platform, with a net inflow of nearly $5 billion, far surpassing other exchanges.
Furthermore, according to data released by Kaiko in January, after reaching a settlement with the Department of Justice, Binance’s market share compared to 23 other centralized exchanges hardly decreased. The hype around ETFs in January led to a surge in global trading volume, helping Binance’s market share recover to nearly 50%. With Binance’s continued expansion in global compliance, it is expected to maintain its industry-leading position as a key indicator of market development.
From a technical analysis perspective, BNB formed a bullish inverse head and shoulders pattern after reaching a bottom from June to December last year, and volume started to increase in October. Subsequently, BNB continued to show an increase in volume in late December and stabilized at the $263 price level, eventually reaching the key resistance level of $340, achieving satisfactory gains.
After a month of short-term correction, BNB broke through the resistance level of a potential long-term double bottom pattern in mid-February, potentially initiating a new upward trend. Whether it can continue the momentum remains to be seen.
Potential Catalysts for BNB’s Bullish Outlook
Although the cryptocurrency market has experienced an astonishing surge since the beginning of 2023, the price of Bitcoin has not reached a new all-time high yet. Based on the development of the past two cycles, Bitcoin tends to break the previous high about seven months after the halving event, leading to a subsequent upward trend that drives stronger overall market gains.
With the Bitcoin halving expected to occur in April this year, the potential price increase could boost market sentiment and promote the growth of trading volume on Binance. Considering Binance’s massive user base of over 177 million worldwide, users who use BNB to obtain trading fee discounts may increase, driving the demand for BNB and further pushing up its price.
As the cryptocurrency market enters a bull market cycle, more and more developers are entering the field. After accumulating and developing during the bear market period, many cryptocurrency projects are rapidly emerging. Additionally, with institutional funds flowing back into the crypto space, the growth rate of the entire industry is expected to accelerate further.
In such market conditions, the number of emerging projects seeking exposure and funding support through Binance Launchpool or its token issuance platform Launchpad is expected to significantly increase. This will incentivize more users to buy and hold BNB and bring new active users to applications on the BNB Chain.
Binance has been continuously expanding its business into new markets and striving to meet local compliance requirements. For example, Binance entered the Japanese market in 2022 through the acquisition of the SEBC platform and officially launched Binance Japan in August last year. BNB also made its debut in the Japanese market, and to date, Binance Japan has become the platform with the most trading pairs locally. Binance’s compliance advantage in global markets further creates its growth potential, and the growth of users in these regions can increase the adoption and demand for BNB.
Binance introduced the Web3 wallet, significantly reducing the entry barrier for users into the decentralized world. By providing an intuitive and user-friendly interface, Binance improves the operational process on the blockchain. With the further integration of Binance’s Web3 wallet and the Binance platform, users’ exploration and usage of the BNB Chain will become more frequent. This will not only bring new active users to applications on the BNB Chain but also stimulate the growth of demand for BNB itself.
In the recently released 2024 outlook, BNB Chain expressed its commitment to advancing a multichain architecture called the “One BNB” concept. This concept aims to create a unified solution by seamlessly integrating the BNB Smart Chain, high-performance L2 network opBNB, and storage chain Greenfield to meet the needs of decentralized computing and storage. It also aims to continuously improve performance, speed, security, and cost, making BNB Chain the preferred choice for blockchain developers.
The core goal of this outlook is expected to lay the foundation for a significant expansion of the BNB Chain ecosystem, thereby increasing the value of BNB and expanding its application scenarios. The specific strategies include:
– Focusing on specific dApps to achieve mass adoption: This includes high-frequency DeFi, Artificial Intelligence (AI), full-chain games, decentralized physical infrastructure network (DePIN), decentralized society (DeSoc), as well as high-performance infrastructure such as browsers, data indexing, and account abstraction (AA). These areas have attracted market attention during this bull market. If relevant dApps develop, they should attract funds flowing into the BNB Chain ecosystem.
– Evolving from a single opBNB to opBNB Connect: The high-performance Layer 2 network of BNB Chain, opBNB, will develop “opBNB Connect” in the future, allowing dApps with a potentially large user base to build their own L2 and develop their own ecosystems. All L2s on opBNB Connect can seamlessly interconnect, including cross-chain asset transfers and composability across different protocols.
– Enhancing the scalability of opBNB: Increasing the gas limit from 100 million to 200 million to achieve a target of 10,000 TPS. Designing a data availability layer on BSC based on EIP4844 and Greenfield to reduce transaction costs by 5 to 10 times compared to current levels.
– Maintaining the highest performance EVM state and implementing Parallel EVM 3.0: In 2023, BSC’s block gas limit increased to 1.4 million, the largest among all EVM-compatible chains. The number of transactions once reached 32 million per day, achieving 2,000 TPS. In 2024, the development focus of BNB Chain will shift to optimizing state and storage. The optimized PBSS (Path-based Storage Scheme) and Parallel EVM 3.0 will be gradually implemented between full nodes and validators.
– The core development team is also introducing a measure called “Beacon Chain Fusion,” which plans to retire the BNB Beacon Chain and migrate its functionality to BSC. This will simplify the complexity of the BNB Chain and accelerate the decentralization process of the network and governance. It also means that more BNB holders may participate in the development of the BNB Chain.
Can BNB’s Future Gains Outperform Bitcoin?
Bitcoin has risen over 200% since the beginning of 2023, while ETH and BNB have increased by approximately 147% and 54% respectively. However, since December last year, the surge in BNB has outperformed these two largest cryptocurrencies by market capitalization. Can BNB maintain this strong performance after the Bitcoin halving?
Based on the development of previous cycles, Bitcoin tends to lead the market in the early stages of a bull market. In the middle and later stages, market funds gradually rotate from Bitcoin to various altcoins, leading to a continuous decline in Bitcoin’s market dominance. If this trend continues in this bull market, BNB is likely to experience larger gains.
Although Binance is the world’s largest cryptocurrency exchange, BNB holders still need to closely monitor the platform’s operations, market dynamics, and regulatory challenges it faces. It is essential to remain vigilant about any abnormal on-chain fund movements. At the same time, breakthroughs in BNB Chain technology and the continuous growth of its on-chain ecosystem are also critical factors. They are not only the cornerstone supporting the price of BNB but also important indicators for evaluating its investment potential.
