Over the past six months, Binance Coin (BNB) has been quietly rallying higher, collecting 189 percent over the same timeframe and notching a new all-time high at $46.90 on Jan. 18. This price high occurred just one day before its quarterly token burn, causing investors to doubt whether or not the BNB price would increase after the event is over.
A token burn is a permanent withdrawal of coins from circulation, and this deflationary tactic is a common method employed in many ventures in the crypto market. As Cointelegraph has stated, the mechanism does not break coins, but rather makes them unusable.
In addition to supply transition, Binance Chain has recently introduced smart contract capabilities that allow Decentralized Finance (DeFi) applications and cross-chain asset swaps to enter. The exchange has also been highly successful since the launch, so both of these reasons are a strong explanation for BNB’s appreciation.
As Binance Futures rolled out, the exchange reported that sales from the futures platform will be included in its quarterly BNB fire. These coins, taken out of circulation, will represent a percentage of Binance’s earnings for the last quarter of 2020.
Despite being the absolute world leader in futures contracts, this service has been introduced quite recently by an ever-growing exchange. Over the last 16 months, the network has risen to $4 billion in open interest. This number exceeds more developed derivative exchanges such as OKEx, Huobi and BitMEX.
Binance originally announced that he would buy back coins meant for demolition, but this stance modified in February 2019. As a result, the real token burning phase requires a decrease in the future supply before the goal of 100 billion is met.
The most recent BNB burning round took place on 16 October 2020 with a limit of BNB 2.25 million. Although the reported stock amounts to 142.41 million, Messari estimates a liquid supply of 108.35 million. This disparity stems from coins that are currently limited or delegated, which means that they are not actually exchanged.
Binance Chain’s evolution
Benchmarking and validation services were introduced in September 2020, and Binance Smart Chain soon began to gain momentum. The network applies the compliant smart contract power of Ethereum to the original Binance Chain.
Shortly after launch, a host of decentralised apps began to appear, totalling 60 ventures and 600,000 unique smart chain addresses. In addition, 3 million BNBs have been assigned to network validators.
To date, Binance Chain’s cross-chain investments have reached $250 million and a $100 million acceleration fund has been set up to attract decentralised finance applications.
Binance Launchpad is yet another positive aspect that supports the appeal of BNB. The website hosts Binance’s Initial Exchange Offering (IEO) and six effective token sales were made in 2020.
Data from TheTie, an alternative social analytics site, reveals that the latest price rise was followed by a dramatic increase in Twitter user engagement. While this is not a primary factor, research suggests that the more exposure a token is paying to social media, the easier it is to gather additional purchasing pressure.
Many investors claim that tokens have a positive effect on the price when availability is limited and this supposedly allows investors to keep their tokens rather than sell them on a market-based basis.
Interestingly, the new burn has little to no impact on the price of the BNB. This condition could mean that, in these events, the demand is shifting to price before the announcement date.
In the other hand, holders may have seen a non-circulating token burn as a non-event. Consequently, those who have recently purchased BNB with the hope of a post-burn pump will be profoundly disappointed.
219 Interactions, 2 today