The following analysis will explore how the number one utility token in the cryptocurrency industry, Binance Coin (BNB), is providing value to its users and the impact that this could have on its market value.
Utility tokens are gaining popularity as some of the top cryptocurrency exchanges in the space are employing them to provide value to their users while funding the development of different projects. Today, even the Merriam-Webster dictionary, one of the most prestigious English dictionaries in the US, has a definition for these types of digital assets.
According to the Merriam-Webster dictionary:
“A utility token is a digital token of cryptocurrency that is issued in order to fund the development of the cryptocurrency and that can be later used to purchase a good or service offered by the issuer of the cryptocurrency.”
At a time where most ICOs failed, utility tokens rose to provide real-world use cases that create intrinsic value in them. The sustained growth of a company drives demand for its native cryptocurrency as its utility expands, and it becomes widely accepted. This is the motto that the world’s largest cryptocurrency exchange by trading volume, Binance, stands by since it introduced Binance Coin in July 2017.
Binance Coin (BNB)
Binance Coin was initially created to pay for trading fees at a discounted rate on the cryptocurrency exchange. But, throughout the years, BNB has developed new functions and use cases within the Binance ecosystem and beyond.
According to a report by SIMETRI:
“BNB’s utility has increased substantially. The coin finds more acceptance for payments and has been integrated by other companies in financial services such as lending. The largest increases have come from within the Binance ecosystem, however. BNB can also now be used on Binance DEX, as well as the company’s Launchpad and Lending services.”
Within the Binance ecosystem, Binace Coin can be used to pay for different services on the Binance Chain. It can also be used to pay for fees on Binance DEX and to participate in token sales in Binance Launchpad. Through Binance Lending users can grow their BNB holdings and exchange it for fiat currencies across Binance’s fiat partners around the world.
Binance Coin also offers utility beyond the Binance ecosystem as the company behind it has entered into strategic partnerships to expand’s the use case of this digital asset. TravelbyBit and Pundi X allow users to pay for goods and services in BNB while Trip.io enables people to purchase flights or book hotels using this token. Freelancers can now be paid in BNB through CanWork, and properties can be bought using Propy. Binance Coin can also be stored within the built-in apps of the latest flagship smartphones from Samsung and HTC.
As the utility of this token expands, Binance saw a spike in the burn rate of this token. On the most recent quarterly BNB Burn, Binance burned over 2 million BNB, equivalent to more than $36 million worth of tokens. This number represents a 250 percent increase compared to the amount of BNB burned in the previous quarter. In a blog post, Binance explained that the spike was a direct result of the growth the company is seeing in its margin trading, accessibility for cryptocurrency purchases, and other services.
The growth rate that the company is experiencing does not seem to align with the price of BNB, according to Changpeng Zhao, CEO at Binance. The former CTO at OKCoin does not understand how a cryptocurrency with so much utility can depreciate 64 percent from its all-time high, as Binance Coin did. According to Zhao:
“Even with all the progress and results, the BNB price declined from its ATH near the beginning of the quarter. There are many possible reasons for it, although none of them make much sense to me. Yes, there was a drop in the price of bitcoin, our industry’s index. There was some FUD on various things (per usual). Regardless of all that, I think (in my biased view) our results out-shine them all. Yet, the price of BNB did decline. Markets often confuse people, even me sometimes.”
BNB Technical Analysis
Despite the steep decline in market value, Binance Coin managed to bounce off the 100-week moving average on its 1-week chart. Now, this cryptocurrency is trading just above the 50-week moving average, and it is on a green two candlestick that was preceded by a red nine candlestick, which is a very bullish sign per the TD sequential indicator. If volume continues rising, BNB could surge to try to test the resistance given by the 25-week moving average that is sitting around $26. This represents a 30 percent upswing from the current price levels.
Based on the 3-day chart, however, BNB’s price is contained within an ascending parallel channel. Every time this crypto reaches the bottom of the channel, it bounces off to the middle or the top. But, when it reaches the top, it falls back to the middle or the bottom.
At the moment, BNB is trading around the middle of the channel after getting rejected by the top. This could indicate that it will try to continue trading within the upper side of the channel before it falls back to the bottom.
If this is the case, BNB could soon test the 50 percent Fibonacci retracement level that sits around $21.85, and then pull back to the bottom of the channel before it rises again. This would allow it to find some buy orders to fill that could potentially increase the volume behind it to support the move up to the 25-week moving average.
Changpeng Zhao’s efforts to build the “financial infrastructure provider for tomorrow” and “bring the freedom of money to the masses” is paying off. His company has grown exponentially, relying on its ability to tap into new markets and expand its services. In September, the firm launched its U.S. branch, offering a fiat on-ramp and free trading for all listed coins.
Now, Binance is opening an office in Beijing that is intended to take advantage of the government’s plan to embrace blockchain technology. Additionally, the firm rolled out support for Alipay and WeChat, making Binance Coin available for over a billion Chinese citizens. This will help the company make strides in China with its recently launched peer-to-peer trading platform.
With all the developments that Binance is making to be at the forefront of the cryptocurrency industry, it seems like it would be a matter of time before the price of its native currency starts catching up. Changpeng Zhao said:
“I know for a fact that the long-term winners are the people who build products that other people use, and we intend to continue to do that furiously.”