Any doubt that crypto is back in bull season may have been obliterated as Binance Coin (BNB) just became the first major cryptocurrency to break above its January 2018 all-time high. Binance Coin has experienced exponential growth since the start of the year, when it was trading at $6.01 per token. Binance Coin has now set a new all-time high above $25. Though it has slipped slightly in the hours since, it seems likely that it has the momentum to push on further in the weeks and months to come.
Binance Coin’s performance is particularly impressive when compared to the recent price performance of other top cryptocurrencies. When Binance Coin hit its previous all-time high of $24.46 on January 12, 2018, most altcoins were enjoying similarly significant bull runs. Binance is now ranked as the 7th largest cryptocurrency by market cap; in January 2018, it wasn’t even in the top 20.
Last month, we asked whether Binance Coin was on the verge of decoupling from Bitcoin. Its recent price performance has answered that question with a resounding “yes.” Binance Coin’s rise during the first four months of 2019 has massively outstripped the performance of other top cryptocurrencies, Bitcoin included. Binance Coin’s previous BTC all-time high was set at 0.0026 on June 18, 2018. BNB broke above its all-time high again in February this year and hasn’t stopped rising since. Right now, BNB is trading at 0.0047 BTC – close to double its previous BTC peak.
By every measure, Binance Coin is on fire right now. Binance regularly buys back and “burns” its tokens, meaning the circulating supply is now lower than it was at the time of its previous all-time high. So while BNB’s market cap was $2.4 billion during its January 2018 peak, it’s now at $3.5 billion. Its trading volume over the past 24 hours was close to $443 million. This is lower than the peak of $521 million’s worth of BNB being traded back in January 2018, but it is another area of explosive recent growth. Trading volume was less than $200 million just 48 hours ago, and was lower than $40 million on January 1.
To summarise, Binance Coin has experienced a 4x increase in price and a 10x increase in volume since the start of the year. So what has been driving this explosive growth?
A very eventful week for Binance
BNB’s climb to a new all-time high follows a week of big announcements from Binance. On Monday, Binance CEO Changpeng “CZ” Zhao followed through on a threat made over Twitter that he would delist Bitcoin Cash SV from the platform if its creator Craig Wright continued claiming to be Satoshi Nakamoto, the anonymous creator of Bitcoin. On Wednesday, CZ confirmed Binance’s latest fiat-to-crypto gateway launch in Singapore within the next week. And Friday marked the long-anticipated launch of Binance Chain, with CZ confirming that BNB tokens would be moved from Ethereum to the new mainnet on April 23.
The Bitcoin Cash SV delisting was a stark reminder of just how important a Binance listing can be to cryptocurrency projects. Prior to the delisting announcement, Bitcoin Cash SV was trading at above $73. 24 hours later, it had dropped below $55, shedding more than 25% of its value.
The other announcements are a reminder of how rapidly Binance is expanding its operations. Binance has long been consistently ranked as the largest crypto-to-crypto exchange by trading volume, but 2019 has seen it rapidly expand into other areas. Other exchanges have been rushing to follow Binance’s lead in launching new tokens via Initial Exchange Offerings (IEOs).
A large part of the excitement surrounding the creation of Binance Chain is that it will provide the framework for a decentralized version of the Binance exchange. Decentralized exchanges (DEXs) have long been considered to pose a serious threat to the dominance of centralized exchanges, as they allow users to trade directly from their own wallets, eliminating the risk of storing cryptocurrency on a centralized exchange. While much of Binance’s success has been built on its trusted reputation within the crypto space, hacks and other incidents have caused the loss of users’ funds on countless exchanges over the years, from the infamous 2014 Mt. Gox hack to the more recent loss of access to funds that followed the death of the owner of Canada’s largest crypto exchange, QuadrigaCX. The creation of its own DEX means that Binance has future-proofed itself against what was probably the biggest long-term threat to its business model.
Token burns and increased utility pushing BNB higher
Binance Coin’s incredibly strong recent performance is validation of steps Binance has taken to add to its coin’s value. Regular rounds of token buy backs and burns have been one of the many effective methods Binance has used to push BNB’s price higher. The last token burn was carried out in mid-January, with Binance destroying 1,623,818 BNB – roughly equivalent to $9.4 million worth of tokens. Previous token burns have seen as many as 2.5 million BNB destroyed at once. In total, 10,824,471 BNB have been destroyed over six rounds of quarterly token burns. The math behind this process is simple – the less tokens there are, the more valuable each individual token becomes. Each quarter, Binance allocates 20% of its quarterly profits to buying back tokens to be burned. This process is set to continue until 100 million BNB have been destroyed, representing 50% of the total that were ever in existence.
Since its launch, the primary utility value of Binance Coin has been to reduce trading fees on the Binance platform. When users elect to pay trading fees using BNB, they receive a 25% reduction in a transaction’s trading fees. And as the largest crypto-to-crypto exchange in existence, this means there will be a demand for BNB tokens for as long as the exchange maintains its popularity.
The launch of Binance Labs earlier this year has added another dimension to BNB’s utility value. In the same way that Ethereum’s explosive growth in 2017 was spurred in a large part by the need to buy ETH in order to participate in Initial Coin Offerings (ICO), users participating in token sales through Binance Labs can pay with BNB. Several successful token sales have been completed through Binance Labs so far this year, with January’s $14 million launch of the TRON-backed BitTorrent Token being the most attention-grabbing.
Other exchanges have followed Binance’s lead in providing a platform for IEOs, though some of their efforts have underscored how slickly Binance has executed the concept. KuCoin and Bittrex’s first IEOs both sold out within seconds, but many have argued that this should have been impossible given the steps needed to complete the token sale process, leading to accusations that both token sales had been hijacked by bots. But the IEO concept has been an undoubted winner for other exchanges, with Huobi Coin and KuCoin Shares both more than doubling in value since the start of the year. However, the proliferation of IEOs shows that Binance is setting the pace for its competitors.
The Binance Effect
Bitcoin Cash SV isn’t the first cryptocurrency to feel the consequences of a Binance delisting. Binance regularly removes coins from its platform for a variety of reasons, whether it be fraudulent activity from the project’s team or simply low-trading volume. These delistings often occur in batches, such as in February when Binance announced its intention to remove CLOAK, MOD, SALT, SUB and WINGS from the platform. The value of these tokens fell by an average of 56% soon after news of their delisting broke.
To many within cryptocurrency, a Binance listing is a badge of legitimacy. Few other exchanges come close to keeping with Binance on trading volume, meaning tokens outside the Binance ecosystem are much more likely to be “pumped and dumped” or otherwise manipulated. In an article covering the launch of Binance Chain, The Block Crypto quoted representatives from Decred and stablecoin Paxos as explaining the importance of a Binance listing to their projects. Decred listings manager JZ Zeppettini described Binance as “a main liquidity center” for cryptocurrency and “the go-to exchange for most traders,” while a spokeswoman from Paxos said:
“Just given the size of Binance and its trading volume it is obviously a very influential exchange and we knew it would be very meaningful for PAX to be listed on Binance… It’s like how the Impossible Meat Burger is now at Burger King — that’s more meaningful than it being available at just some store.”
There is now a feeling among some that being on Binance Chain may become similarly important in the near-future. Two days ago, the decentralized social media platform Mithril announced in a blog post that it was the first project to migrate to Binance Chain from Ethereum. The Block Crypto’s article alleges that Binance is “trying to leverage the influence it has on token teams to convince projects to migrate to Binance Chain,” quoting an employee from an unnamed project who apparently received an email from Binance that threatened serious consequences if they didn’t make the switch:
“Well, let’s just say that projects who move some % of their chain off of Ethereum to Binance Chain will get favorable treatment — and those that don’t could be delisted if their volumes are less than $1M/day.”
Another anonymous crypto executive is quoted as making similar allegations:
“Binance is trying to get everything onto their chain… They’ve made this bet that violating the law will work because they are going to transition to being a totally decentralized chain… To make that a success then they need to get everybody onto that chain. Interestingly, they’ve built their entire business around Ethereum. What is Binance without Ethereum?”
Whether or not the allegations contained within the article are true, there is no doubt that the major moves Binance has been making this year have seen it move beyond being simply a cryptocurrency exchange. With Binance Chain being viewed as a competitor to Ethereum, Binance’s ever-expanding remit is seen by some as part of a battle to become the Google of Crypto.
Is Binance becoming “The Google of Crypto”?
The upcoming launch of a crypto-to-fiat exchange in Singapore follows the launch of a Jersey-based gateway for converting Euros and British Pounds into cryptocurrency in January. The past few months has seen Binance launch a similar service in Uganada and also offer Bitcoin purchases at 1,300 locations in Australia. Following the Singapore announcement, CZ told CoinDesk that Binance also has plans for expansion in the United States, though he wasn’t willing to discuss them in detail yet.
Coinbase currently dominates fiat cryptocurrency purchases in the US. Binance and Coinbase have increasingly begun to overlap in the range of services each provides, moving away from their initial distinct roles of respectively being crypto-to-crypto and fiat-to-crypto exchanges. We discussed the increasing competition between both platforms last month.
Binance’s latest moves and the incredibly positive effect they’ve had on BNB’s price show its making big strides toward become an all-powerful entity in the cryptocurrency space.