Bitcoin

Binance Coin (BNB) hits a new all-time high one day before the token burn

For the past 6 months, Binance Coin (BNB) has risen calmly, gaining 189% over that period, reaching a new all-time high of $ 46.90 today, January 18, 2021. This price increase only occurred the day before his quarterly burning of tokens, This leads to the question of whether or not the price of the BNB will increase after this event is over.

A token burn is the process of permanently removing coins from circulation. This deflation technique is a common practice used by many projects in the cryptocurrency world. As Cointelegraph reported, the process does not destroy the coins, but makes them unusable.

In addition to changing the offering, Binance Chain recently introduced smart contract features that businesses can use to join Decentralized financial applications (DeFi) and cross-chain asset swaps. The exchange has also been hugely profitable since its inception, so all of these factors are a good reason for BNB’s price increase.

BNB / USDT price chart. Source: TradingView
Binance Coin (BNB) hits a new all-time high one day before the token burn
Binance Coin (BNB) hits a new all-time high one day before the token burn

When it started Binance Futures, the exchange announced that The revenues from the futures platform would be included in the quarterly BNB incineration. These withdrawn coins represent a percentage of Binance’s revenue for the final quarter of last year.

Although the ever-growing exchange is the absolute leader in futures contracts, it introduced such a service relatively recently. In the 16 months since its inception, the platform has grown to an open interest of $ 4 billion. That number outperforms more established derivatives exchanges like OKEx, Huobi and BitMEX.

Initially, Binance stated that it would buy back the coins that were supposed to be “destroyed”, but that policy changed in February 2019. Therefore, the actual token burning process involves reducing the potential supply until it is reached the goal of 100 billion coins.

The last round of BNB burnout took place on October 16, 2020 and comprised a total of 2.25 million BNB. Although his reported offer is Messari estimates the liquidity supply at 142.41 million, at 108.35 million. This difference arises from the currencies currently locked or purchased, which means that they are not actually used for trading.

The evolution of the Binance chain

After launching stakeout and validation services in September 2020, Binance Smart Chain quickly gained popularity. The network expands the original Binance chain with Ethereum-compatible smart contract functions.

Shortly after the start, a large number of decentralized applications with a total of 60 projects and 600,000 unique smart chain addresses were created. In addition, network validators have deployed 3 million BNB.

Till date, Binance Chain’s cross-chain net worth exceeded USD 250 million. and a $ 100 million accelerator fund was created to attract DeFi applications.

The Binance Launchpad is another positive factor that supports the value of BNB. The platform houses the First Exchange Offer (IEO) from Binance and there were six successful token sales in 2020.

BNB-related Twitter user activity vs. dollar market capitalization. Source: The tie

Data from The tie, An alternative social analytics platform shows that the recent price hike was accompanied by a sharp surge in Twitter user activity. While not a critical factor, the data shows that the more exposure a token receives on social media, the easier it becomes to get additional buying pressure.

Many investors believe that burning tokens will have a positive effect on the price as the supply is reduced. This is to encourage investors to keep their tokens instead of selling them in the market every time a maximum is hit.

Interestingly, the last burn had little or no effect on the price of the BNB. This situation could indicate that on these events, before the date of the announcement, the market is heading towards price.

On the flip side, investors may have perceived the burning of non-circulating tokens as a zero event. Hence, those who recently purchased BNB with the expectation of a spike after the incineration may be deeply disappointed.

The views and opinions expressed here are solely those of automobiler and do not necessarily reflect the views of Cointelegraph. Every investment and business move is associated with risks. You must do your own research when making a decision.

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