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BNB launch: The trade perspective

04 November  2020 | ZebPay Trade Desk

The Binance token (BNB) is now live on ZebPay! Trade BNB on ZebPay (with zero trading fees through all of November!), or open a Binance account.

BNB was launched in 2017, a few days prior to the launch of the Binance cryptocurrency exchange. Originally an ERC-20 token running on the Ethereum network, the ERC-20 BNB coins were later swapped with BEP2 BNB on a 1:1 ratio in April 2019 with the launch of the Binance Chain mainnet. They are no longer hosted on the Ethereum network.

BNB is used as a payment method, a utility token to pay for fees on the Binance exchange, and for participation in token sales on the Binance launchpad. BNB also powers the Binance DEX (decentralized exchange). Read more about the technology behind BNB.

Binance Coin (BNB) Snapshot

At the time of writing:

Market Capitalization$3,770,217,980 USD
Market Rank (by Market Cap.)#7
Current Price$26.11 USD
24 HR Volume $427,935,077 USD
All Time High/Low$39.57 USD / $0.0961 USD
Script in Circulation 144,406,561 BNB
Total Supply 176,406,561 BNB

BNB cannot be mined, since the Binance Blockchain uses the Byzantine Fault Tolerance (BFT) consensus mechanism. Instead, validators are used to validate blocks, and earn BNB for securing the network. Prior to migrating to the Binance Chain, Binance performed coin burns on the Ethereum network using smart contract burn functions. The number of tokens burned would depend on the volume of transactions done over a 3 month period on the exchange. Now however, on the Binance Chain, BNB coin burns no longer take place. Instead, a specific command on Binance Chain is deployed, as opposed to a smart contract.

Investment Analysis

Since launching in 2017, BNB has appreciated more than 44%. Volatility for BNB has seen a downward trend over the period as more participants get involved. YTD BNB has witnessed an 8% appreciation, with daily return volatility at 4.94% . The table below summarizes BNB returns for different time horizons and the volatility of daily returns as well.

Holding PeriodALL- TIME3YR2YR1YRYTD
Avg. Return44.03%15.57%7.22%5.46%8.08%
Realised Vol7.80%4.91%4.77%4.73%4.94%

As BNB is used as a payment method on Binance, it creates a natural convexity. Hence, lower moves or dips in BNB can be systematically used to accumulate BNBs at lower prices and reduces net fees paid in USDs. This positive gamma or convexity that’s there on lower moves reverses on rally, at least partially, as those who have accumulated BNBs at a lower price will want to keep some part of fees. This results in lower profits booked compared to other coins.

This whole situation should lead to BNB volatility being inversely proportional to Binance trading volumes, and this phenomenon is confirmed in the table above.

Technical Analysis

At the time of writing, BNB is trading around $26.92 reflecting a loss of 3.7% approximately, over a period of 24-hours.

BNB had a fairly sluggish yet positive October. It crept higher slowly before correction at month-end, continuing into November. It sold off after testing the resistance of $31.8, and it breached the support of $29.5. It now trades near the support of $26.2.

On the Technical front, the picture has deteriorated but we still see some positive signs. RSI levels points to oversold levels after a correction while the MACD line is still positive, though the histogram has turned negative. Price trades just above the 200 day EMA after bouncing off from it. ADX hasn’t confirmed a bearish trend despite correction.

We remain cautiously bullish on BNB with an aim to ride the price till $29 levels or 10% from current levels. The bullish stance will be negated if price breaches below 200-day EMA convincingly.

Conclusion

BNB powers the Binance Ecosystem and is the native token of the Binance Chain. It has several use cases, namely, to pay fees on Binance Exchange and to participate in token sales hosted on the Binance Launchpad. Moreover, more and more vendors are accepting BNB as a payment token. The token also continues to power the Binance DEX as well. BNB has developed significant traction since its launch, and it does seem like it has a lot in store for the future.

References:

https://coinmarketcap.com/

https://academy.binance.com/

Disclaimer: 

This report is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any investor. All investors should consider such factors in consultation with a professional advisor of their choosing when deciding if an investment is appropriate. The Company has prepared this report based on information available to it, including information derived from public sources that have not been independently verified. No representation or warranty, express or implied, is provided in relation to the fairness, accuracy, correctness, completeness or reliability of the information, opinions or conclusions expressed herein. This report is preliminary and subject to change; the Company undertakes no obligation to update or revise the reports to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events. Trading & Investments in cryptocurrencies viz. Bitcoin, Bitcoin Cash, Ethereum etc.are very speculative and are subject to market risks. The analysis by Author is for informational purposes only and should not be treated as investment advice

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