Competitor blockchains, daily transaction slowdown, and flat TVL are a few challenges for BNB, but the data shows that Binance Coin remains a contender.
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Binance Coin (BNB) holders enjoyed a 1,760% increase from $37 to $692 between January and May 2021, but as is customary in crypto, this increase was followed by a 69% correction two weeks later.
From there, it was a bit difficult to regain investor confidence and BNB was unable to produce an all-time high in November despite the total crypto market cap reaching a peak of 3 trillion dollars.
Aside from the 33% drop from the all-time high, BNB investors have other reasons to question whether the current $465 price level is sustainable. Especially since traders recently paid up to 3% per week to keep short positions of futures contracts open, betting on the downside.
Traders turn bearish on January 10
Unlike regular monthly contracts, perpetual futures prices are very similar to prices at regular spot exchanges. This makes the process a lot easier for retail traders as they no longer need to manually calculate futures premiums or flip positions near expiration.
The funding rate allows this magic to happen and it is charged from the buyer (buyer) as they claim more leverage. However, when the situation reverses and the shorts (sellers) are over-leveraged, the funding rate becomes negative and they become the payers.
Note that the funding rate on BNB futures was mostly flat between December 15 and January 10, but then quickly turned negative .13%. This rate equates to 2.8% per week, a relatively high cost for sellers (sellers) to sell short to hold their positions. The movement happened while BNB tested the $410 support, the lowest price in 90 days.
Premiums outperform competing blockchains
The reason behind the Binance short sale is likely due to the high premium compared to competing smart contract chains. For example, BNB’s $78.2 billion market cap is 80% higher than Solana’s $43.3 billion (SOL). Furthermore, premiums compared to Terra (LUNA)’s $28.2 billion are 178% and 275% versus Avalanche’s (AVAX) $20.8 billion. Other factors could also be due to the total value of Binance Smart Chain locked (TVL) stagnating at $15 billion.
By comparison, Terra’s TVL grew from $9 billion to $19 billion in three months, while Avalanche’s grew from $6.5 billion to $11.6 billion in the same period. The competition has surpassed many of the applications of Binance Chain, except for the number of active users on the decentralized exchange PancakeSwap.
To accurately gauge whether or not the Binance Smart Chain usage has come out on top, one must analyze the network’s activity. Some decentralized applications (dApps) such as games, social markets, and NFTs require less total value locked (TVL) to be deposited on smart contracts.
The data shows that daily trading on BSC peaked above 15 million on November 25 and recently averaged 6.5 million per day. It should also be noted that Binance Chain’s main competitor Ethereum has struggled with average transaction fees of $40 or more, which makes for the perfect scenario for competing chains.
Despite this market share opportunity, Binance Wise Chain seems to have stabilized in terms of daily trading and TVL, both of which are signs of growth and adoption.
Binance’s Leading Derivatives Position May Be Challenged
The competition for the top spot of Binance could be challenged as Coinbase, the largest US crypto exchange, plans to start offering derivatives trading following the acquisition of FairX.
Furthermore, FTX exchange has raised $1.32 billion from private investors, and FTX US completed its acquisition of crypto options exchange LedgerX on October 25. reinforces plans to offer derivatives contracts to US investors.
There is a good chance that Binance will keep the lead over Coinbase and FTX derivatives as it has a first-mover advantage. Furthermore, Binance launched a $1 billion development fund on October 12 to expand the capabilities of the Binance Smart Chain ecosystem.
Overvalued or not, solid fundamentals are supporting the third-largest cryptocurrency, and while the short-term price performance isn’t promising, there are plenty of future catalysts for growth. .
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