Binance Coin has gained 53% in the past seven days. Rising to third place after Bitcoin and Ethereum, consolidating its position as one of the world’s largest cryptocurrencies. It is a digital token related to Binance’s success, and Binance’s spot trading volume is higher than Coinbase. The Binance Coin token’s (BNB) price has soared 14 times this year, with a market value of US$86 billion. That makes it the third most valuable cryptocurrency after Bitcoin ($1.1 trillion) and Ethereum ($252 billion).
Token investors are betting on its supply and demand relationship, which translates into a bet on the Binance ecosystem’s success. As of 2:51 pm on Tuesday, BNB trades at $562.42, which has not changed much in the past 24 hours.
Unlike the upcoming shares of Coinbase, BNB tokens do not grant any equity. Binance is a closed company, still led by its founder, Changpeng Zhao.
BNB is an “exchange token.” Traders can use it to pay fees on various Binance trading platforms. Also, sometimes to give payers a discount, and even as a currency on the blockchain network sponsored by exchanges. Some cryptocurrency investors see BNB as a way to obtain excess returns by simply buying Bitcoin.
Smart Chain plays an essential role in Binance’s success
In August 2020, binance began to use the so-called Smart Chain blockchain network to run intelligent contract-based applications. Binance Smart Chain (BSC) is a less decentralized public blockchain and is considered a competitor to the Ethereum blockchain. According to DappRadar’s first quarter 2021 overview report released on April 1, transaction fees are about 35 times cheaper. BSC has surpassed Ethereum’s unique daily active wallet in the first three months of 2021.
Binance Smart Chain’s remarkable success has played an essential role in the rapid growth of BNB’s value. As a “discount token,” BNB provides discounts for Binance’s decentralized exchange (Binance DEX) and Binance transactions.
The listing of Coinbase’s stock may be another potential driver of BNB’s earnings growth. Although Binance does not intend to go public, the token ecosystem may benefit from speculation on the value of Coinbase. The pre-listing tracking contract traded on the FTX exchange puts Coinbase’s stock price at approximately $634. It means that the market value of the U.S. exchange exceeds $160 billion.
Of course, the rapid development of BNB has brought significant attention and risks. While the cryptocurrency industry values decentralization, BNB’s creator, the Binance team, still owns more than 80% of BNB. It means that if regulators come, there is a central authority to answer. This regulatory risk may cause severe obstacles to the BNB’s listing on other exchanges or its development in the U.S. or Europe. However, at least in the short term, hedge funds and even ordinary cryptocurrency investors may not care much about this.
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