Competitor blockchains, a decrease in daily transactions, and flattened TVL are just a few of the obstacles that BNB faces, but statistics show that Binance Coin remains a competitor. Binance Coin (BNB) investors saw a 1,760 percent increase from $37 to $692 between January and May 2021, but as is typical in crypto, this explosion was followed by a 69 percent drop two weeks later. From there, it's been a difficult road to regaining investors' trust, and BNB failed to set another all-time high in November, despite the fact that the whole cryptocurrency market value soared at $3 trillion.
Aside from being 33% lower than its all-time high, BNB investors have additional reasons to doubt if the current $465 price is sustainable. Especially given traders were previously paying up to 3% every week to keep short bets in futures open, betting on the fall. In contrast to typical monthly contracts, the pricing of perpetual futures is quite comparable to those of conventional spot markets. This simplifies the procedure for retail traders because they no longer need to compute the futures premium or manually roll over holdings as they approach expiry.
This sorcery is enabled by the financing rate, which is levied by longs (buyers) when they need greater leverage. When the situation is flipped and shorts (sellers) are over-leveraged, the funding rate falls and they are the ones who pay the price. Take note of how the funding rate on BNB futures remained generally stable between December 15 and January 10, but then abruptly moved to -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.
The cause for the Binance short might be the exorbitant premium paid in comparison to other smart-contract networks. For example, BNB's market capitalization of $78.2 billion is 80 percent greater than Solana's (SOL) $43.3 billion. Furthermore, the premium over Terra's (LUNA) $28.2 billion is 178 percent, and 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 comparison, Terra's TVL expanded from $9 billion to $19 billion in three months, while Avalanche's climbed from $6.5 billion to $11.6 billion in the same time frame. Except for the number of active users on the PancakeSwap decentralized exchange, the competition has considerably outpaced Binance Chain's apps. To determine whether Binance Smart Chain usage has peaked, one must examine the network's behavior. Some decentralized apps (dApps) like gaming, social, and NFT markets require only a little amount of total value locked (TVL) to be put on smart contracts.
According to data, daily transactions on BSC peaked at more than 15 million on November 25 and are now averaging 6.5 million per day. It should also be noted that Binance Chain's primary competitor Ethereum has been battling with average transaction costs of $40 or more, which offers the ideal setting for competing chains. Despite this possibility to capture market share, Binance Smart Chain appears to have plateaued in terms of daily transactions and TVL, both of which indicate growth and acceptance.
After acquiring FairFX, Coinbase, America's largest crypto 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 crypto 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 will 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.
Whether overpriced or not, the third-largest cryptocurrency is supported by good fundamentals, and while short-term price performance is not encouraging, there are still plenty of prospective catalysts for development.
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