Binance Coin (BNB), currently an ERC-20 token, is the native token of the Binance exchange. The exchange, originally Chinese but now based in Malta, is the world's most used crypto-exchange, despite offering no fiat on ramps.
Its trading volumes and demand has risen exponentially since the inception of the platform due in no small part to its fees being significantly lower than those of other large exchanges, (less than half the price of Bittrex, for example), its support for multiple language, and the constant listing of new trading pairs.
BNB coins, when used for transactions on Binance, delivers a 50% discount over the already low 0.1% transaction fee charged for non-BNB transactions. In common with exchange tokens in general, this makes it particularly useful for traders transacting large volumes.
Binance pairs and exchanges
The most popular pairs for trading BNB tokens are Tether, Bitcoin and Ethereum. Binance also offers a range of other major crypto pairings with BNB, including: EOS, Ripple, Cardano and Bitcoin Cash.
Interestingly, there are a few exchanges outside of Binance that offer on-ramps for BNB. ERC-20 only exchange, Bancor, offers a BNT/BNB trading pair. Armenian exchange, Exrates offers a BNB to USD fiat on-ramp.
Stability in a volatile market
Binance 3 Month Price Graph
BNB has shown steady price growth despite market-wide bearishness, and volatility in the price of Bitcoin. BNB is currently trading at $16.94 (Index) up 82.5% since March 21st.
Many consider BNB as a hedge against BTC price fluctuations because the primary driver of BNB prices is trading volumes on the Binance exchange. In a situation where negative market news inspires a sell off, exchange tokens are in demand because they provide access to cheaper transactions when dumping coins. Conversely, if investors are looking to hoard because of a piece of good news. BNB provides a liquidity option in and out of fluctuating, but active, crypto markets.
There is also a passive reward for holding BNB tokens. Similar to how companies buy back their own shares, cryptocurrencies perform coin burns to lower existing supply, thereby raising the value of the token. Binance runs quarterly burns to reward token holders, and also to entice new buyers.
The value of the token is also tied to the performance and prospects of the Binance organization. This is not always positive. For example, news in January that the Chinese government would deepen its crackdown on centralized cryptocurrency trading infrastructure, caused a dip in the value of the BNB token. But the Binance news is frequently good, for example the announcement recently that it would offer fiat on-ramps with Euro pairings, was met with enthusiasm across the crypto-sphere.
Besides the new Fiat pairs, every time Binance lists a new crypto-to-crypto pair it increases potential volumes, again sending positive signals to the market.
The challenge for an exchange opening to new volume is extra strain on servers hosting the additional transactions. Binance has previously struggled to handle increasing transaction demand so managing capacity and preventing outages, will be key to maintaining perceptions of the health of the overall Binance product.
The growth of the Binance platform
As mentioned, a key feature of Binance, apart from its popularity and cheap fees, is the number of tokens and pairs listed on the exchange.
Binance provides a cheap, accessible, and highly liquid option for crypto enthusiasts to access more obscure coins like Siacoin (SC), Singularitynet (AGI), Civic (CVC) and many others. Additional to this, Binance consistently adds options to buy more established coins, recently listing new pairs for Ripple, IOTA and Stellar.
Binance has also shown a willingness to adapt and be aggressive when competing with other exchanges. Less than an hour after Coinbase officially announced it would be listing Ethereum Classic (ETC) pairs, Binance responded by adding two new ETC trading options to its portfolio.
Binance’s tweet, 48 minutes after Coinbase’s official announcement
But Binance’s greatest strength could also be its biggest weakness. The downside of listing so many tokens, for example, is the potential of exposing customers to scams or insecure networks. Some coins listed, like Bytecoin (BCN) and Quarkcoin (QCN), have had their authenticity questioned with major flaws in the projects identified.
Many speculate that the only criteria for new coins to gain a listing on Binance, is the ability to pay its high listing fees, with minimal compliance or vetting measures being a part of the process. This is rumoured to be the reason why many legitimized, old-skool projects like Dogecoin, for example, are not listed on Binance, but smaller projects and ICOs, like Cometcoin(CMT), which has a Wiess rating of E-, are.
BNB is one of the most interesting exchange coins given its strong user base, price stability, growth in an unstable market, and being tied to an exchange thought to generate US$200M in profit per quarter.
Exponential Moving Averages (EMA) with Long Term Trends
On the daily chart, the bullish EMA cross, or Golden Cross, is still intact, which confirms BNB’s positive price trend despite falling from an all-time high above $26 in January 2018 to beneath $6 in early February 2018.
Since the February 6, 2018 lows, BNB has increased ~200% within a tight, linear range, visualized by the pitchfork. If this trajectory sustains, a median price projection would be ~$20. Additionally, the volume flow indicator (VFI) has always been above 0 which shows consistent bullish strength. The VFI interpretation is: a value above 0 is bullish and below 0 is bearish, with divergences between price and oscillator being high probability signals.
Ichimoku Clouds with Slow Wave Trend Oscillator (SWTO)
The Ichimoku Cloud uses four metrics to determine 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, Lagging Span (Chikou), and Senkou Span (A & B).
The status of the current Cloud metrics on the daily time frame with singled settings (10/30/60/30) for quicker signals is bullish; price is above the Cloud, Cloud is bullish, the TK cross is bullish, and the Lagging Span is above the Cloud and price.
A traditional long entry would occur with a price break above the Cloud, known as a Kumo breakout, with price holding above the Cloud. From there, the trader would use either the Tenkan, Kijun, or Senkou A as their trailing stop.
BNB is currently sitting at ~$16.70 after price successfully completed a Kumo breakout on April 20th (first black circle). Since then, the Kumo breakout reversed once, but eventually re-broke above the Cloud on June 2nd (second black circle), where it has remained since. The SWTO is approaching overbought territory (orange arrow), which may present a short term cap since price has failed twice to break above $17.50 (0.618 fibonacci retracement level from the all-time high - not shown). The support levels for price are $16 (Senkou B), $15, and $14.25 (Senkou A), while price targets for a continued Kumo breakout are $18, $20, $22, and $24 (retest of all-time high).
The status of the current Cloud metrics on the daily time frame with doubled settings (20/60/120/30) for more accurate signals is bullish; price is above the Cloud, Cloud is bullish, TK cross is bullish, and the Lagging Span is above Cloud and price.
BNB attempted to complete a Kumo breakout on two occasions, April 24th and June 6th (black circles), but failed both times. However, since June 16th, price has successfully broken above the Cloud and held the level, which is a buy signal. One point of concern, is that after each successful Kumo breakout, price hits resistance, falls to a key Cloud support level, and then appreciates. Price has failed twice to break above ~$17.50 and SWTO is approaching overbought territory, which may represent a coming price decline. If the historical pattern persists, a fall to Cloud support between $13.50 and $14.30, before price begins marching higher is likely.
The utility of BNB tokens coupled with the aggressive forward momentum of the Binance organization, has seen it buck downward market trends and become one of the stand out stability options among all cryptographic assets.
Beyond short-term gains, the Binance coin whitepaper outlines how BNB will be used as Gas to operate smart contracts, that will be run on the network, in year 4 of the project. This will provide extra utility for long term holders of BNB.
The technicals for BNB are firmly bullish. Both, the prudent short term trader (10/30/60/30 settings) and longer term trader (20/60/120/30 settings) would view the current TK cross, Kumo breakout, and price hold above the Cloud as a buy signal. The key support levels for these traders are $13.50, $14.30, $15, and $16 while the price targets are $18, $20, $22, and $24.
One caveat is that if historical price patterns continue, BNB might be approaching a near term price top with an accompanying fall to support between $13.50 and $14.30. Traders already with long positions should maintain tight stops while mean reversion traders, not currently in long positions, will await a near term price fall before scaling into a long position near $14.30, which is the price overlap of both the fast and slow Ichimoku Cloud support levels (dashed line).
Disclaimer: This analysis has been designed for informational and educational purposes only. Readers are advised to conduct their own independent research into individual assets before making a purchase decision.
About the authors
Christopher Brookins is the founder and CEO of Pugilist Ventures, a quantitative investment firm focused on digital assets and blockchain technology. Chris has a deep knowledge and unique perspective on digital assets formed by his polymath experience in equity trading, credit investing, and business development at two West Coast startups (one acquired). He has been involved in the blockchain community since 2014. Follow @chris__brookins
Aditya Das is Brave New Coin's in-house market analyst. Raised in Dubai, UAE, he holds a post-graduate honors degree in Economics from the University of Auckland and a BA in Economics from the University of Sussex. Prior to joining BNC his most recent roles were as a researcher and Economics tutor at the University of Auckland. Follow @Quartlifecrypto.