Why Binance Coin Has Fallen 33% From Its All-Time High.

Why Binance Coin Has Fallen 33% From Its All-Time High.

2022-01-19 | Selina Mathew

Why Binance Coin Has Fallen 33% From Its All-Time High.

Binance Coin (BNB) investors saw a 1,760 percent increase from $37 to $692 during January and May 2021, however as is typical in cryptocurrency, this explosion was accompanied by a 69 percent drop two weeks afterward.

Since there, it's been a difficult road to regain investors' trust, and BNB refused to clear another all-time high in November, despite the fact that the whole crypto market value soared at $3 trillion.

Aside from being 33% lower than its all-time high, BNB buyers have additional grounds to doubt if the present $465 price is viable. Particularly given traders were previously spending up to 3% every week to maintain short bets in futures open, betting on the fall.

On January 10, Traders Began To Become Negative

In contrast to typical monthly contracts, the pricing of everlasting futures is quite comparable to those of conventional spot markets. This simplifies the procedure for retail traders since they no more have to compute the futures premium or physically roll over holdings as they approach expiration.

This sorcery is enabled by the financing rate, which is levied by longs (buyers) when they need greater leverage. When the scenario is flipped and shorts (sellers) are over-leveraged, the funding rate falls and they are the individuals who pay the price.

Between December 15 and January 10, the funding rate on BNB futures was mainly stable, but then abruptly moved to minus 0.13 percent. This rate equates to 2.8 percent every week, which is a somewhat significant cost for shorts (sellers) to maintain their holdings. The movement occurred as BNB challenged the $410 support level, its lowest in 90 days.

High Premium In Comparison To Rival Blockchains

The cause for the Binance short might be the exorbitant premium paid in comparison to other smart-contract networks. For instance, BNB's market capitalization of $78.2 billion is 80 percent greater than Solana's (SOL) $43.3 billion. Furthermore, the premium against Terra's (LUNA) $28.2 billion is 178 percent, as well as the premium over Avalanche's (AVAX) $20.8 billion, is 275 percent. Other variables that might be at work include Binance Smart Chain's total value locked (TVL), which has remained stable at $15 billion.

In contrast, Terra's TVL expanded from $9 billion to $19 billion in three months, whereas Avalanche's climbed from $6.5 billion to $11.6 billion in the very same time frame. Excluding the number of active users on the PancakeSwap decentralized exchange, the rivalry has considerably outpaced Binance Chain's apps.

To determine if Binance Smart Chain usage has peaked, one must examine the network's behavior. Certain decentralized apps (dApps) like gaming, social, and NFT markets need only a little amount of total value locked (TVL) to be put on smart contracts.

Notwithstanding this possibility to capture market share, Binance Smart Chain appears to have plateaued in respect of daily transactions and TVL, both of which indicate growth and acceptance.
Binance's dominant position in derivatives may be challenged.

After acquiring FairX, Coinbase, America's biggest cryptocurrency exchange, aims to begin introducing futures trading, which might put Binance's dominance in jeopardy.

Furthermore, the FTX exchange received $1.32 billion from private investors, and on October 25, FTX US completed its acquisition of the cryptocurrency options exchange LedgerX. This cements its ambitions to provide derivatives contracts to US investors.

Given its first-mover advantage, there's a decent probability Binance would maintain its edge over Coinbase and FTX futures. In addition, on October 12, Binance created a $1 billion development fund to increase the possibilities of the Binance Smart Chain ecosystem.

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