Tron’s CEO, Justin Sun recently suggested that cryptocurrency exchange, Binance’s BNB is the new Bitcoin. While the apex cryptocurrency and alt coins lost $5 billion in value over 48 hours, Binance coin increased to $1.8 billion from $800 million at the start of the year.
Within a month, the price of Binance Coin rose from $7.8 to $15.31 by over 96 percent against the US dollar. Its the only cryptocurrency out of the top 10 to achieve a yearly gain against the dollar.
Binance’s proposed decentralized exchange, the Binance DEX may be one of the reasons driving prices. The exchange uses BNB coin as a base pair which may have contributed to the rise in the token’s price.
Use Cases and Coin Burns
BNB can be used in payments, entertainment, shopping and travel industries. The increases in partnerships made by BNB may encourage demand for BNB.
BNB’s coin burn of over $9.4 million contributed to a reduction in circulating coins. BNB burns take place every quarter until 100,000,000 BNB are finally destroyed, representing 50% of the total BNB (200,000,000 BNB).
BNB’s market cap is $2,172,840,955 USD, a figure which from the outside looking in seems great until one realizes market cap isn’t always a great indicator for the true value of cryptocurrencies. It can be easily manipulated. Movements by “whales” and changes in exchanges can easily distract from some other factors.
A cryptocurrency’s market cap doesn’t necessarily equals value. Price reflects the payment for a token and not necessarily the value. The OTC markets for cryptocurrencies are a great example of this where their price can be markedly different from prices paid on other exchanges.
Market sentiments for cryptocurrencies, driven by a lot of people with little understanding of the underlying technology behind cryptocurrencies can be deceptive. Take for example, decentralised exchanges. For now, many of them are difficult to use and more expensive than centralised exchanges. Many people don’t even understand the risks behind centralised or decentralised exchanges.
In the past, Bitcoin and ETH have added billions to their market cap overnight. Realistically, this is unlikely to have been a result of sudden increases in user-base. More investors were probably willing to pay a higher price for the cryptocurrencies. Such price increases weren’t evidence of actual understanding of the underlying technology.
Circulating supply may be a better way to determine market capitalization. In contrast to total supply, circulating supply can serve as a better reflection of supply and demand.
As more consumers purchase cryptocurrencies, the use of BNB presents itself as a great proposition for discounts on trades. As a leading exchange, it attracts many who feel confident in its utility. To compare it as the next bitcoin seems outlandish. It isn’t as easily accessible as bitcoin for those in regions that need it. BNB doesn’t have the underlying technology like bitcoin. It has features which are similar to a security token. That may be a good start.
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Calvin Ebun-Amu is passionate about finance and technology. While studying his bachelor’s degree, he found himself using his spare time to research and write about finance. Calvin is particularly fascinated by economics and risk management. When he’s not writing, he’s reading a book or article on risk and uncertainty by his favourite non-fiction author, Nassim Nicholas Taleb. Calvin has a bachelors degree in law and a post-graduate diploma in business.