Binance Coin (BNB) is the cryptocurrency of the Binance platform. It is a trading platform exclusively for cryptocurrencies. The name "Binance" is a combination of binary and finance. Thus, the startup name shows that only cryptocurrencies can be traded against each other. It is not possible to trade cryptocurrencies against fiat.
The cryptocurrency currently has a daily trading volume of 1.5 billion - 2 billion US dollars and is still increasing. In total, there will only be 200 million BNBs. Binance uses the ERC20 token standard, a set of rules for the creation of tokens on the Ethereum blockchain, from Ethereum and has distributed it as follows: 50% sold on ICO, 40% to the team, and 10% to Angel investors.
The coin can be used to pay fees on Binance. These include trading fees, transaction fees, listing fees, and others. Binance gives you a huge discount when fees are paid in BNB. The schedule of BNB fees discount is as follows: In the first year, 50% discount on all fees, second year 25% discount, third year 12.5% discount, fourth year 6.75 % discount, and from the fifth year onwards there is no discount. Obviously, the purpose of such a policy is to incentive more people to use the coin on its platform to gain more popularity and gain advantages among various competitors.
In Q1 2018, the company bought back 100 million BNB and immediately destroyed all of them to increase the value of the remaining coins. Currently, the circulating supply is 154.5 million, which is accounted for 90.6% of the total supply of 170.5 million coins. We all know that reducing the supply will increase the price from Econ101, so that benefits the coin holders.
As you all know, I am not a big fan of technical analysis (staring at the chart to predict the future price). Today, I’d like to discuss the future of BNB from a different perspective, fundamental analysis.
BNB is the fourth largest cryptocurrency in terms of market capitalization. However, its popularity and acceptance are very little, compared to Bitcoin (BTC) and Ethereum (ETH). This creates a huge disadvantage to the coin itself. For example, if I invest in cryptocurrency as a speculator, then BNB wouldn’t be my priority as either BTC or ETH is better. News reports more on BTC and ETH than BNB. You can search on Google, I bet you see BTC and ETH before BNB. This indicates that BNB has less popularity and market acceptance than other coins.
On the other hand, if you are a long-term investor, BNB wouldn’t be your choice either. Normally, long-term investors view crypto as another asset class or have faith in its future (a digital currency that would be used and accepted widely). In that case, BNB is only at the beginning. Like what I mentioned above, the coin itself can only be used on the company’s platform, which has limited utility. Unlike other cryptos, the market hasn’t ready to accept BNB as a method of payment yet, where others have been gaining popularity.
One of the reasons why large financial institutions are interested in buying crypto is that data shows the correlation between the cryptos and other asset classes is close to zero. What does that mean? It means that the price movement of the cryptos has little or no effect on other asset classes. And institutions love non-correlation assets! But, the correlation between one crypto and another crypto is significantly positively correlated. You can see that if one crypto was affected by some sort of news or statements from Twitter, it will affect the whole crypto market. Unlike the stock market where you can invest in stock between different sectors to hedge the unexpected, I haven’t seen anyone saying using one crypto to hedge the risk from another crypto. So, don’t use BNB for hedging the risk from another crypto.
There are other good cryptos to invest in, but BNB is not one of them due to its lack of popularity and market acceptance. Meanwhile, the current crypto market hasn’t been pleasant lately so I strongly recommend DON’T invest with leverage. People say always buy the dip, but they never tell you where the dip is. Manage your position carefully.