Binance Coin (BNB) provides access to various features on the Binance exchange. While the asset was initially an ERC-20 token, migration to the Binance Chain (BEP2) took place in late April 2019. The market cap currently stands at US$2.4 billion with more than US$113 million in trade volume in the past 24 hours. BNB coin is ranked 10th on the Brave New Coin market cap table. Since the mainnet transition, BNB price correlations with other top assets have continued to increase.
The Binance exchange opened in July 2017, with founder and CEO Changpeng Zhao at the helm. Zhao had previously worked at blockchain.info from December 2013 until May 2014, and OKCoin as CTO from June 2014 until February 2015.
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The BNB token ICO occurred from July 1st, 2017 to July 21st, 2017, where 100 million BNB tokens were sold, raising US$15 million with a token price of US$0.15. Notable investors and advisors included Matthew Roszak, Roger Ver, Chandler Guo, Zhao Dong, and Da Hongfei.
BNB has a capped supply of 200 million tokens, with 50% sold during the ICO, 40% going to the founding team, and 10% going to angel investors. The team funds have a vesting schedule, where 20% of the 16 million tokens were initially released and a further 20% will be released annually for the subsequent four years after the ICO.
According to the whitepaper, the funds are allocated for the following; 35% for building the Binance platform and performing upgrades to the system, including team recruiting, training, and development; 50% for Binance branding and marketing, including continuous promotion and education around Binance and blockchain innovations; and 15% is kept in reserve as an emergency fund.
One unique aspect of the BNB token management are the burning events that take place every quarter. Tokens are acquired for burning through exchange fees, OTC markets, or sold on the market and bought back later for the burn. However, Zhao has not explicitly stated how this process is completed.
The Binance coin burns are paid for with 20% of the total exchange profits from the quarter. The current circulating supply is 147,883,948 BNB, accounting for 11 token burns thus far. The burning events will continue until 100 million BNB, or 50% of the total supply, is destroyed. Q1 2020 saw the second-highest total profit since token burning began.
The use cases for BNB ensure users remain in the closed garden ecosystem of Binance, which includes; Binance.com, Binance.US, the Binance DEX, Binance Launchpad, BEP2, and margin trading. Binance was originally founded in China, but moved to Japan in late 2017 and had offices in Taiwan by March 2018. Shortly thereafter, Binance announced a move to Malta to open a fiat-to-crypto exchange. In January 2019, the company launched Binance Jersey with fiat-to-crypto trading of the Euro (EUR) and British Pound (GBP).
Binance has added several services over the past six months including; margin and futures trading, BGBP and BUSD stablecoins, OTC for the Yuan, lending, staking, and savings. Binance.US was also launched in September 2019 with US users required to move off Binance.com for regulatory reasons.
Source: Binance Blog
The BUSD stablecoin was launched nine months ago and has reached one billion USD in purchase volume. As reported by Binance, 155,000 users currently hold BUSD, which can be used on the Binance exchange or the Binance DEX throughout the Binance ecosystem. When comparing circulating supply of all stablecoins, BUSD is fourth, behind Tether, USDC, and Paxos.
Source: Binance Blog
Projects migrating to the BNB chain, or ICO projects listing on the BNB chain, must also purchase BNB tokens, currently equivalent to approximately US$30,000 (see table below). These fees are subject to change through a governance mechanism on BEP2. In October 2018, Binance announced that any exchange listing fees on Binance.com would be sent to a charity address, which has raised over 971 BTC, or nearly US$9 million, from nearly 1,700 donors. It is unclear whether DEX listing fees are currently participating in this charity fund.
Binance.com, Binance.US, and the Binance DEX have continued to aggressively list a myriad of trading pairs, including pairs denominated in BNB. Fees for both exchanges can be paid with BNB and non-BNB assets, with fees paid in BNB currently attracting a 25% discount. Additionally, Binance.com and Binance.US, have a tiered trading fee discount program for accounts holding a significant BNB balance. These fees are much lower than Binance’s competitors.
The launch of the Binance DEX followed a two-month testnet period, during which nearly 8.5 million transactions were made across a simulated trading competition, coding competition, and bug bounty program, where new updates and enhancements were implemented. In July 2019, the Binance DEX geo-restricted users in 29 countries, including the US.
The BEP2 mainnet went live on April 23rd and is focused on token issuance and trading. All transaction fees are denominated in BNB. The chain uses the Tendermint Byzantine Fault Tolerance (BFT) consensus mechanism and does not have smart contract capabilities.
According to the BEP2 explainer, “the initial validators are selected from trusted members of the Binance community, and will eventually expand to more members as the Binance blockchain and ecosystem matures, this responsibility will be distributed,” with more validators to be introduced over time. Light Simple Payment Verification (SPV) nodes can also use the network without verification or taking part in consensus.
As of January 2020, the Binance DEX exceeded US$50 million in trading volume on 121 tradable pairs and integrated trading through the Trezor hardware wallet. There have also been about 50 million transactions submitted by over 330,000 addresses with a total of 165 BEP2 tokens on the Binance Chain.
Source: Binance Blog
The Binance IEO platform, “Launchpad,” completed the ecosystem’s first IEO in late April and uses a system of lottery tickets for participation. Each lottery ticket is obtained by holding at least 100 BNB over a 20-day period preceding the lottery, with a maximum of five lottery tickets per account. Overall, Binance Launchpad IEOs have outperformed and outraised most projects on other platforms. Binance IEO returns have also strongly outpaced those of other exchanges by several magnitudes.
Sources: Blockchain Capital
Starting from July 2018, 10% of all trading fees are stored in the Binance Secure Asset Fund for Users (SAFU). The SAFU acts as additional disaster insurance. On May 8th, Binance reported a theft of 7,074 BTC worth over US$40 million at the time. Zhao later reported that the BTC was withdrawn from Binance’s hot wallets, which contained only 2% of the exchange’s total BTC holdings. Binance’s other wallets were unaffected. All funds lost in the hack were replaced with Binance emergency funds.
The exchange was shuttered for several days while key system infrastructure was reset and rebuilt to mitigate future attacks, including significant changes to the API, 2FA, and withdrawal validation areas, which were exploited by hackers during this incident. The attack was similar to the Viacoin and Syscoin market abnormalities which occurred in March and July 2018, when the VIA/BTC pair briefly reached 0.025 BTC and the SYS/BTC pair briefly reached 96 BTC.
There are three levels of API permissions on Binance; read, trade, and withdrawal. For Viacoin and Syscoin, APIs were likely accessed through weakly secured third-party platforms using these API keys for trading purposes. In the most recent attack, a much larger list of API keys was accessed by an attacker, which included API keys allowing withdrawals. The LINK/PAX pair was also exploited in the same fashion as the VIA/BTC and SYS/BTC pairs had been previously and subsequently reached nearly US$10,000.
On-chain statistics for the BNB token include both the ERC-20 token and the BEP2 mainnet. Since the mainnet launch in April 2019 , transaction counts per day (line, chart below) have increased and average transaction values per day (fill, chart below) have decreased. Over the past few months, transactions reached all-time highs while transaction values reached near all-time lows. This is likely a direct function of the Binance DEX launch and associated transactions.
BNB daily active addresses (DAAs) have ranged from 1,000 to 24,000 over the past year (fill, chart below). BNB DAAs highly correlate with BNB token price (line, chart below). In July 2019, Binance announced geo-restriction for US users, disabling US users entirely by September. The drop off in BNB DAA and token price both correlated with the announcement.
A key driver in the success of the BNB token is the Binance brand’s global footprint and sustained access to trade volume. The company employs between 500-600 employees across the globe. Since early 2018, the Binance exchange has consistently held the largest portion of the trading market. This has also likely put a bullseye on Binance from a regulatory perspective and may attract the attention of law enforcement officials, specifically in the US. Of the top 10 exchanges by real trading volume, Binance.US does not have money-service-business distinction or a New York BitLicense.
In the markets, BNB exchange-traded volume over the past 24 hours has predominantly been led by the Tether (USDT) and Bitcoin (BTC) pairs. Almost all of this volume comes from the Binance exchange itself. As many other exchanges begin to release their own exchange coins, such as Bitfinex’s LEO, it is unlikely that BNB will ever be listed on competing exchanges. In some cases, Binance would also likely require the exchange to hold the BNB token in order to facilitate trading.
Worldwide Google Trends data for the terms “Binance Coin” (top) remains significantly down from late 2017 and early 2018. A slow rise in searches in late 2017 and early 2018 corresponded with market-wide price highs, likely signaling interest from new market participants at that time. A 2015 study found a strong correlation between the Google Trends data and BTC price, while a May 2017 study concluded that when the U.S. Google "Bitcoin" searches increased dramatically, BTC price dropped.
Binance.com has gained a significant amount of traffic over the past three months, according to a search engine analysis by Alexa. The site is currently ranked 1,029th globally and 3,497th in the US. Last year, Binance.com ranked 841st globally. Coinbase and Binance.US are currently ranked 557th and 3,162nd, respectively, in the US while coinmarketcap.com has the highest rank among cryptocurrency-related websites at 883rd globally.
BNB has followed the wider cryptocurrency market recently, with some gains in early 2020, a swift retracement in March, and a strong recovery off the lows. As the macro trend continues to recover, strength and duration of the new trend can be measured using Exponential Moving Averages, Volume Profile of the Visible Range, Yearly Pivots, and the Ichimoku Cloud. Further background information on the technical analysis discussed below can be found here.
On the BNB/USD daily chart, the 50-day and 200-day Exponential Moving Averages (EMAs) have been bearishly crossed since March 12th. Typically, bullish trend confirmation occurs once these key EMAs are bullish crossed and after the 200-day EMA has been confirmed as support. Both volume and RSI show no signs of bullish or bearish divergences. Substantial volume support (horizontal bars) sits in the US$12-16 zone as well as US$9.75. Overhead resistance peaks at US$22 and decreases above that level until the all-time high at US$40.
Price has also potentially formed a diamond bottom chart pattern, signaling a bullish bias and the potential for reversal. This pattern includes a diamond shape created with higher highs and lower lows, touching each trend line more than once. Resolution of the pattern should take place over the next few weeks and potentially bring the price to US$38 based on the measured move. Yearly pivot resistance also sits at US$20 and US$34.
Turning to the Ichimoku Cloud, four metrics are used to indicate if a trend exists; the current price in relation to the Cloud, the color of the Cloud (red for bearish, green for bullish), the Tenkan (T) and Kijun (K) cross, and the Lagging Span. The best entry always occurs when most of the signals flip from bearish to bullish, or vice versa.
Cloud metrics on the daily time frame, with doubled settings (20/60/120/30) for more accurate signals, are currently bullish; the spot price is above the Cloud, the Cloud is bullish, the TK cross is nearly bullish, and the Lagging Span is above Cloud and above price. The trend will remain bullish as long as the spot price is above the Cloud. The previous two bullish Kumo breakouts resulted in a 48% and 400% move, respectively.
On the BNB/BTC daily chart, the 50-day EMA and 200-day EMAs are bearishly crossed with price recently mean reverting back to the 200-day EMA. Bullish trend confirmation will occur if the Golden Cross occurs in the next few weeks. Price is also inside of the Cloud, further indicating an indeterminate trend. Both volume and RSI show no signs of bullish or bearish divergences, although RSI is currently at a historic high of 81. Overhead VPVR resistance continues to decline if price makes any higher highs while strong support sits at 0.0015 BTC. Long-term overhead resistance sits at the Yearly Pivots of 0.0027 BTC and 0.0040 BTC.
Binance has masterfully engineered the BNB token to become an all-encompassing aspect in every facet of the ever-growing Binance ecosystem. Because of this, the token has gained a high degree of utility, which may also be seen by some as gatekeeping through the IEO lottery system, DEX listing fees, BEP2 transaction fees, and BEP2 token migrations. These fees can also be seen as analogous to membership fees on the trading floors of traditional legacy markets. Users are also incentivized to spend BNB to pay for trading fees, which are discounted by 25%, or hold BNB for a maker/taker discount. This coupon was reduced to 12.5% this year, 6.75% next year, and ended completely on Binance’s 5th anniversary.
As for the token burn, thus far, there has been an unenforceable implied contract with users, which has been met as expected. There is no reason to believe this will not continue, but the migration of BNB to the BEP2 chain now means Binance is the centralized authority of these token transactions, at least for the time being. From a public relations perspective, Binance has no reason to ever reverse transactions, but they do now likely have the ability to do so. A legal question remains as to where the blurred lines of security and utility could dampen token success in the future, if the token gains regulatory scrutiny, especially now that the token is listed on Binance.US.
Technicals for BNB to USD suggest a nascent bullish trend as price is now above the 200-day EMA and daily Cloud. A potential bullish chart pattern is also close to resolving, which may propel price to US$38. Otherwise, strong downside volume support sits from US$12-US$16.
Technicals for BNB/BTC show a much more indeterminate trend with a recent mean reversion. The trend will remain non-specific until price is once again above the 200-day EMA and daily Cloud, which may not occur for several weeks. Long-term overhead resistance sits at the Yearly Pivots of 0.0027 BTC and 0.0040 BTC. Historically since 2018, BNB has been most bullish in Q1 and Q2 and more bearish in Q3 and Q4 of any given year.