Reasons Behind the Success of the Binance Coin

Gunaseelan Arunachalam   Dec 29, 2019 00:00 3 Min Read


The native coin of the world's largest crypto-exchange has returned to its previous historical maximum, while others remain 80-90% lower. The BNB token quickly rose and holds the seventh line in the ranking of cryptocurrencies in terms of market capitalization. - 2019-12-27T175707.975.jpg


Although no one knows for sure why Binance Coin performed so well, there are several factors that have definitely had a positive effect. 


Binance burns BNB tokens every quarter 


Each quarter, Binance burns 20% of BNB, which the exchange collects in the form of commissions from the platform. This removes them from circulation forever. Binance will continue to burn Binance Coins until the 100 million coins threshold has been reached. 


Token burning, as a rule, has a certain effect on the coin. With a decrease in circulating supply, the balance of supply and demand shifts. Supply is reduced and maintains constant demand, pushing prices higher. 


Burning coins also have a positive psychological effect on the market. However, in a rational world, this effect is minimal. The exchange withdraws from circulation only 1-2% of the Binance Coin issue, but the price does not show a larger increase immediately after burning. To feel the real changes in the rational world, it would take more time and changes in proposals on a much larger scale. 


BNB now has actual utility 


Binance Coin technically already had some utility before. With a token, you can pay for a cryptocurrency transaction and a Binance commission to get a discount, as well as earn rewards on several different platforms. However, in the above functions, the Binance Coin coin is not unique. 


The actual usefulness of Binance Coin appeared with the launch of the Binance Chain and will continue with the subsequent launch of the corresponding decentralized exchange (DEX). Binance Chain was launched on Apr. 18. On Apr. 23, the Binance team switched BNB from the ERC20 token to its own token in the new chain. 


Then Binance Coin will be used “as payment for every transfer that goes online.” Judging by the current volume of Binance, this change should lead to a significant increase in demand for BNB. 


But why now? 


The announcement of the Binance Chain is not new. The company announced its plans in March 2018. But now the team has produced something tangible. By the end of February this year, they launched the Binance Chain test network. After the news about the launch of testnet, and then mainnet, the price of BNB rose a couple of times well. 


Binance price spikes after releases 


Binance's reputation is ahead of itself. Perhaps the most influential (but difficult to measure) factor is Binance's stellar reputation in the crypto community. Since speculation is considered a healthy part of investing in cryptocurrency, sometimes unrelated determinants can change the price of a token. 


Binance is often the first step investors take to altcoins. Therefore, it is logical that Binance Coin will be one of the first altcoins that investors will want to purchase. 


Changpeng Zhao (CZ), CEO of Binance, is a famous figure in the crypto space with a large number of followers on Twitter. Many praise him as an example of how to properly manage cryptocurrency exchanges. Many think that Changpeng Zhao might be more generous. In any case, only one of his presence continues to attract attention to the platform’s native coin. 


The more investors learn about the token, the more chances it has to grow in the right direction. Finally, many years of positive experience using the Binance platform brings confidence to the BNB base token. Most people have only very minor comments about the operation of the exchange. 


The Future of Binance Coin 


There are many risks in investing in BNB, because in Binance Coin there is still not enough real usefulness. The coin does not provide opportunities for use in smart contracts, therefore, Binance-based DApp applications are practically not used. 


Added to this is the weak security potential of the coin. The company behind the exchange has already faced some regulatory problems, which forced it to move to another country. Future legal problems can cause a sharp drop in prices if they are serious enough. 


As with any investment, especially cryptocurrency, it is important to conduct your own research and keep track of any new finds. Although Binance Coin seems like a delicious investment opportunity today, anything can happen tomorrow. 



Image via Shutterstock




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