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The Reasons Behind Binance Coin's Astonishing 1500% Price Surge


June 2021

The past twelve months felt like a ride at Kingda Ka (the tallest roller coaster in the world) for all cryptocurrency investors and traders. A bit more than a year ago, the entire market had crashed to the pit bottom after the rapid spread of coronavirus had been declared the global pandemic. At that time, many thought that such a huge price depreciation across the board would significantly prolong the bear market that had been lingering since the infamous pop of the 2017/2018 bubble that marked the commencement of the so-called crypto winter.

Buy/Sell BNB

Financial experts across all media had been preaching about the demise of crypto, arguing that this asset class is too risky and fragile to become the point of attraction for big retail investors and institutions. Back then, those concerns seemed more than justified - after a reasonably good performance in 2019 when Binance Coin (BNB) had reached the all-time high of $33 and even made us label it the "crypto rock star" in our price prediction articles, the price of the exchange coin had plummeted to $11 on the backdrop of the global pandemic scare.

Fast forward twelve plus some months, and we see BNB going on wild price discovery, crushing one psychological level after another in a huge sequence of green candles that look like mad Hulk is running through walls, the walls of sell orders. To continue the rock star reference, in 2019 and Q1 of 2020, Binance Coin was like Crazy Town that took over the charts with "Butterfly" and then seemingly sank into oblivion. Whereas right now, it's like the Beatles during the 1964 world tour. To substantiate this claim, let's just check out the BNB's performance over the last calendar year:

BNB 1-year chart

BNB 1-year chart

In twelve months, Binance Coin has had a monstrous price appreciation of 2600% - at the time of writing - rivaled only by insane gains of Dogecoin (DOGE) that is for some reason very favored by Elon Musk and a bunch of other celebrities;

On the year-to-date time frame, the exchange coin has surged 1496% and made a laughing stock of Bitcoin (BTC), having outperformed the dominant cryptocurrency by 422%, though it dashed away from Ethereum (ETH) "only" by 156%. The first week of February marked the beginning of the fairy tale rise of BNB as the price had overcome the stubborn resistance at $44 and took off like the SpaceX shuttle and hasn't looked back since.
The past three months saw Binance Coin making 1300% to the upside, going from $46 to the current $592, probably making a lot of people BNB millionaires. At the moment, BNB's all-time high was established at $640 on Binance, though the price has already retraced 6% from that level. 

Obviously, such a massive bullish rally meant that the market capitalization of BNB also went sky-high. At the dawn of the year, it had been dangling around $5,3 billion, which kept the coin out the top 10 ranks. Today, the marketcap of the cryptocurrency under review has reached $93 billion, surpassing that of XRP ($62 billion), USDT ($51 billion), and ADA ($43 billion), which ultimately took it to the 3rd place in global rankings, though it's unlikely to make one step higher in the near future since ETH hasn't been idle and drove its market capitalization to $319 billion, while its price has also gone past all possible barriers and is now closing in on the $3,000 level.

It's clear that such an unprecedented rise couldn't have happened without good reason, discovering which is the primary purpose of that article. But let's make it clear right off the bat that the success of Binance Coin didn't result from media hype and backing from various celebrities and billionaires, which was the case of the cute but somewhat shallow meme coin devoted to Shiba Inu. BNB is backed by the ever-growing blockchain infrastructure and a large number of associated projects that provide for solid fundamentals that support the current bull run. Even though this super rally already seems to be overextended, it's certainly not a fluke or a bubble but the result of years of relentless work and networking by the Binance team and its media-friendly CEO Changpeng Zhao, who is better known by the nickname CZ.

A quick recap of Binance's history and its rise to the top 

Binance Coin is the native token of Binance, the world's largest centralized cryptocurrency exchange by trading volume. As of the time of writing, the daily trading volume on that platform amounts to $36,3 billion, three times larger than that of Huobi Global ($8,9 billion) and almost ten-fold more than the volume recorded on the rival Coinbase Pro ($3,8 billion), though it must be noted that Coinbase Pro is focused mostly on cryptocurrency traders and investors from the United States, whereas Binance serves to the global audience, while also running the subsidiary Binance US platform.

Binance boasts over 40 million weekly visits; it offers access to 1205 markets and accommodates 358 cryptocurrencies, which is significantly less than the number of coins featured on mid-tier exchanges like Hotbit, HitBTC, or Crex24 that might have an array of exotic coins but don't support any fiat currencies, while Binance allows for seamless trading with 46 national currencies, which explains why traders are flocking to that particular exchange.

The platform was founded in 2017 by Zhao, a well-known digital entrepreneur who was previously associated with Blockchain.info and OKCoin. CZ started Binance with a small team of fellow crypto enthusiasts that ensured the immediate success of the project that raised $15 million through the ICO that offered early investors BNB at what now seems like a laughable price - by the way, that ICO lasted for no more than several minutes, which speak to the fact that the demand for Binance Coin was extremely high from the get-go.

Binance was initially operating in one of the Chinese jurisdictions but had to make an early escape after financial regulators imposed a ban on cryptocurrency trading in September 2017. Upon that, Binance Holdings Limited had relocated to Malta, a crypto-friendly state that strived to earn the status of "blockchain island," though, technically, the company headquarters are registered on Seychelles and the Cayman Islands for tax purposes, obviously, and its operations are regulated by the local financial authorities, not the MFSA.

Over the course of its relatively short history, Binance has been a shining example of a successful crypto project. Although the road to being recognized as the biggest online exchange by trading volume hasn't been without a few bumps: in 2019, it suffered a major security breach, which resulted in a loss of around $40 million to an unknown group of hackers. In 2020, there has been a scandal involving Binance and its CEO Changpeng Zhao who allegedly had a sophisticated scheme to circumvent the US financial regulations. The crypto company responded with a defamation lawsuit which had been dropped later in the year.

The ever-growing ecosystem that paved the way to BNB's mega rally

As you can see, throughout the years, Binance hasn't been involved in any major scandal or got into a feud with regulators, which allowed the team to steadily develop probably the biggest ecosystem that gave more utility for Binance Coin and had a positive effect on its price and market capitalization.

The core of the whole ecosystem is, of course, the cryptocurrency exchange that provides not only for spot and margin trading but also offers access to futures and options trading, Over-the-Counter (OTC), and Peer-to-Peer (P2P) trading. Once the exchange had established a strong foothold in the crypto industry, Binance's ecosystem began to spread to the areas of investment and fundraising, which led to the emergence of Binance Labs, an incubator for up-and-coming blockchain projects, along with Binance Launchpad and Launchpool that facilitates the promotion of promising blockchain projects, with recent examples being My Neighbor Alice and its ALICE token; Alien Worlds and TLM token - both are directly related to the popular NFT space; exchange tokens like DODO and TKO, which belong to a promising Indonesian exchange TokoCrypto, along with sports tokens created on Chiliz blockchain: JUV (fan token of Juventus F.C.), PSG (Paris Saint-Germain), and AC Milan (ACM).

All of these tokens can be acquired before the official listing through farming or staking BNB, which gave the native token a huge popularity boost, or Binance's proprietary stablecoin BUSD. Later on, the ecosystem was extended and now includes the information platform, the research department, and Binance Academy. The platform also offers access to its own crypto wallet called Trust Wallet.            

BNB use cases and how they catalyzed the coin's 2019 rally

The ecosystem of this size alone could have provided plenty of use cases for BNB and ensured the steep rise of the coin's price. But the areas of application of the most popular exchange coin didn't stop there. Officially, nearly 90% of all employees of Binance Holdings Limited are being paid their wages in Binance Coin - imagine what a great cumulative bonus must have had those who held onto their coins. Besides, BNB has become an integral part of Binance Chain and Binance Smart Chain (BSC), the latter being the crucial element of BNB's recent success.

Initially, BNB was used as a mere utility token that provided for a substantial discount on trading fees. According to the whitepaper, the discount rate, which amounted to 50% during the first year of operation, would gradually reduce to 25%, then 12.5%, 6.75% until the discount will no longer apply - that will happen at the start of the fifth year of the platform's existence, which would be in July 2022, so enjoy those discounts while they last.

The emergence of the Binance Chain and native coin's subsequent migration to it had also been one of the reasons why BNB became the most expensive exchange coin even before its astronomical rise. In case you didn't know, Binance Coin was the token of ERC-20 standard on the Ethereum blockchain at the time of launch, but such an ambitious project needed its own blockchain to maintain the edge over the competition. When the testnet of Binance Chain was launched on February 20, 2019, decentralized exchanges had only begun getting traction within the crypto community, which ultimately resulted in the emergence of the decentralized finance (DeFi) movement that took the crypto world by storm in 2020. Binance's decentralized exchange (DEX) had been the primary use case for Binance Chain, and it powered the initial rise of Binance Coin to the mentioned all-time high at $33 since it also acted (and still acts) as a native token that is used to pay gas fees.

Like all decentralized exchanges, Binance DEX keeps no custody of traders' funds but also provides means for issuing new tokens and creating new trading pairs. Binance Chain introduced some interesting features to the ecosystem, such as the revised Tendermint BFT consensus, which uses an interesting peer-to-peer networking logic, as well as the Delegated Proof of Stake (DPoS) mechanism. Moreover, Binance Chain is associated with the introduction of the BEP-2 token standard for all digital assets that are stored on the said chain. Consequently, all BNB's of the ERC-20 standard stored on the Chain for the purpose of paying gas fees or staking can be swapped for BNB token of the new standard that slightly improves tokens' functionality within the Binance ecosystem and facilitates a better trading experience on Binance DEX.

To be frank, even though Binance Chain and its offspring DEX seemed like an interesting project at the time, it didn't enjoy the popularity among cryptocurrency traders that the team was hoping for, mainly because the developers had to sacrifice its flexibility, which is inherent to other blockchains upon which decentralized exchanges are built, to achieve a remarkable trading speed. 

In retrospect, it could be perceived as a boost to BNB's utility (along with the price) and the transitional phase to Binance Smart Chain, a much more innovative solution dubbed Binance Smart Chain that really helped the company respond to the challenges posed by the booming DeFi sector which threatens to render centralized exchanges obsolete in the not-so-distant future.

BSC as the main driver of BNB's recent exponential growth

Back in the summer of 2020, when DeFi was rapidly becoming the most discussed topic and decentralized exchanges were generating the trading volume comparable to that seen on centralized platforms, Changpeng Zhao had admitted in the interviews to several media outlets that he is genuinely afraid that the centralized version of Binance couldn't stand the competition from the likes of Uniswap in the long run. It was clear that his team intends to follow the ancient wisdom - if you can beat them, join them, which is exactly what Binance did when its developers began working on Binance Smart Chain. Besides, the CEO understood the importance of implementing smart contracts in the existing ecosystem in order to stay competitive against platforms that are built around the use of smart contracts - Ethereum being the prime example, though it's already threatened by the likes of Cardano.

BSC was made fully compatible with Binance Chain so that users could derive benefit from the high transaction capacity of the latter and the improved smart contract functionality of the former. Moreover, the Smart Chain is fully integrated with the Ethereum Virtual Machine (EVM), which means that it's fully compatible with most decentralized applications created on the Ethereum blockchain, such as MetaMask, which makes BSC a unique solution. And that's where we are getting to the meat of the story behind the unprecedented appreciation of BNB price because that exact compatibility with EVM is what drove the attention of DeFi users to that platform.

The thing is that due to the unresolved scalability issues, the Ethereum network is prone to congestion that had first caused major problems in 2017 when CryptoKitties had been at the peak of popularity. But that seemed like child's play compared to the congestion problems that have arisen when the number of protocols and dApps related to DeFi began to grow like mushrooms after the summer rain. As you may know, practically the entire DeFi movement relies on the Ethereum blockchain, and such a tremendous overload resulted in the sharp increase of gas fees that sometimes reached ridiculous amounts. These circumstances forced both dApp developers and staking investors to abandon the Ethereum blockchain and search for greener pastures, so to speak.

To make matters worse, at least for the developers at the Ethereum Foundation, the non-fungible tokens (NFTs) have sparked the new mania among crypto enthusiast and attracted a lot of celebrities to the blockchain space, who mostly wanted to ride the hype wave as some of these tokens were auctioned on online platforms for insane sums of money. The stories about those mind-blowing purchases immediately made the newsreels, thus added fuel to the fire and attracted more and more profit-seekers to the Ethereum network where all NFTs were minted, stored, and sold. That is a fascinating story in itself, which we have covered in the previous article. But the point is that the meteoric rise of BNB is directly related to the launch of Binance Smart Chain and simultaneous extreme congestion of the Ethereum network. As they say, one man's meat is another man's poison. And to add more appeal to the new product, the BSC community voted on reducing the gas fee from 15 Gwei to 10 Gwei, which corresponded with BNB's strong drive to the price level of around $300.   

Binance Smart Chain daily transaction chart

Binance Smart Chain daily transaction chart

Just check out this daily transaction chart on Binance Smart Chain and compare it to the price action on the BNB/USDT market on the daily time frame. The correlation is quite evident, and we see that the number of transactions began to rise exponentially right after non-fungible tokens became the talk of the town.

NFTs might give Binance Coin another boost

By the way, a few days ago, Binance announced the plans to launch a proprietary NFT marketplace sometime in June. The team is obviously trying to seize the moment and capitalize on the ongoing frenzy by attracting digital artists, content creators, collectors of trading cards, and just people with deep pockets who are willing to pay a pretty penny for a pixelated gif image, ultimately poaching them from the Ethereum blockchain. It won't come as a surprise if Binance comes up with the solution for creating and storing non-fungible tokens to rival the Ethereum blockchain, where the fee for developing, storing, and putting an NFT for sale on marketplaces like OpenSea might cost up to $100 in ETH per single token with no guarantee that the token would ever be sold. Therefore, it would be logical for NFT creators and sellers to look for better and cheaper options. And there is hardly any other blockchain platform that can match Binance in terms of available liquidity, the fee structure, and the size of the user base.

Obviously, BNB will be used as means for making purchases, covering transaction fees, and paying royalties for those items of intellectual property. It means that we will see the realization of yet another use case for the third cryptocurrency and a massive one indeed because NFTs have opened the world of blockchain to an even broader audience that wasn't that much interested in this space before due to its complexity and orientation on finance, digital identity, governance and such, the stuff that isn't easily comprehended by the common folk or humanities-minded individuals like artists, musicians, or writers. 

In conclusion, it's clear that if the cryptocurrency market maintains its bullish stance throughout the current year, and the new NFT marketplace turns out to be a success, Binance Coin would rise a lot higher above its current price level and possibly even challenge Dogecoin or PancakeSwap (CAKE) for the right to be called the hardest gainer of 2021.

Our price prediction algorithm suggests that in six months, the price of Binance Coin will surpass the psychological level at $1,000 and land near $1,400. By the year's end, BNB will be valued at $1,636, while its market capitalization will reach $250 billion.      

Author: Alex Paulson for Crypto-Rating.com

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