Is Binance Coin Worth Investing In 2019?

Last Updated October 21st 2019
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Binance Coin caught your attention? Want to learn everything about it? No worries.

In this article, we’ll take a look at what Binance Coin actually is, the ins and outs of it how it works and how you can potentially make a profit from trading or using it.

Binance Coin is the highly popular cryptocurrency created by the Binance exchange.

The Binance exchange is by far the largest cryptocurrency exchange in the world. They also offer the most crypto to crypto pairs and have a daily trading volume of $1.5 billion.

Binance Coin was made available to the public for the first time 25 July 2017 and has the BNB ticker symbol. It was launched on the Ethereum blockchain as an ERC20 token.

In Binance Coin’s first ICO, they raised 15 million and since then it has moved from the Ethereum blockchain to the Binance blockchain.

Binance Coin has a cap of 200 million which means that eventually, they will surpass Bitcoin in terms of volume, which will make it easier to trade.

At the time of writing, one Binance Coin is worth $27.52. There is a circulating supply of 155,536,713, and a market capitalisation of $4,280,554,665, according to CoinMarketCap, making it the 6th largest cryptocurrency.

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Binance Coin: The top utility token of 2019?

binance coin, binance exchange

Many believe that Binance coin is one of the safest cryptocurrencies out there. Of course, no one can say this for certain.

It is primarily used to pay fees on the Binance cryptocurrency exchange and fees paid in Binance Coin on the exchange receive a discount.

Traders that make transactions with Binance Coin on the Binance exchange get a discount of 25%. In 2017, this discount was even greater, 50%.

It is a very clever way to keep traders coming back to the platform and in a sense, Binance Coin is like a discount coupon.

It is worth wondering though how long this discount will continue to be offered. In the future, it may continue to decrease or even stop.

In fact, according to the white paper, in 2019 Binance was supposed to half this discount yet again to 12.5%, but so far, this has not happened.

It is believed that Binance has not reduced the 25% discount because they want to remain popular and in good faith with their traders.

For now, though, it is something to look out for in the future.

It is also worth mentioning that the white paper also points out that in the 4th year, which would be 2020, the discount will be reduced further to 6.75%.

If this happens, then interest in Binance Coin may stop unless they offer another reason to trade or hold it.

However, Binance Coin is not technically a stablecoin, though it is fairly stable. Binance Coin could be more accurately called a utility token.

Binance Coin’s value is backed by the exchange which has a public address. 

If there is news regarding the Binance exchange or Changpeng Zhao (CZ), it can affect the value of Binance Coin.

CZ is known to be very influential in the cryptocurrency world, however, after the Binance ICO, he relinquished control over the coin to a new CEO. Before Binance, CZ also worked on OKCoin.

Does Binance Coin have the best use case?

Some have commented on how Binance Coin has perhaps one of the best user cases in the cryptocurrency world.

In comparison to other coins, there is a real reason to use it and it can foster a community around it.

Many cryptocurrencies lack this. They make promises that they will do things over time or that people will be able to use smart contracts.

Rarely do they offer tangible features that they can use today. For that reason, utility coins can be very popular.

How does Binance Coin work?

binance coin in front of a laptop with chart

From a technical point of view, there isn’t anything particularly unique about Binance Coin. That said, there are some important things to know about Binance Coin.

As it was built upon the Ethereum blockchain, it can be assumed that much of the technology behind it is very similar. After they switched to their blockchain, there may be more significant differences.

One key difference with Ethereum is that Binance Coin cannot support smart contracts, though BNB can be used as ‘gas’ on the Binance blockchain, which is a similarity.

It should be mentioned though that the Binance Coin is centralised which will always be off-putting for cryptocurrency enthusiasts.

That said, in comparison to other centralised coins, Binance Coin has a much better image.

Coin burning

Binance destroys coins in what they call a ‘burn’. This is mentioned in the Binance white paper.

Every quarter (3 months), Binance plans to destroy Binance Coin in accordance with trading volume on the Binance trading platform

All transactions will be logged on the Binance blockchain. They perform this burn using a smart contract. It is impossible to return the coins once they are destroyed.

They plan to eventually destroy 100 million coins, which will leave 100 million in existence when the 200 million cap is reached. Once 100 million remains, they will stop.

For Binance to perform a burn, they have to use 20% of their profits to buy back BNB.

The team behind Binance owns approximately 40% of the total supply and the burn is to reward the Binance team for their work.

Approximately 9 in 10 employees at Binance receive a portion of their salary in BNB.

What results from this is the supply is deflating instead of inflating. Shifting the supply and demand curve can drive the price of the coin up over time.

This is similar to stocks when companies buy back their stocks from initial investors. It is equivalent to a dividend give out.

You can find out more about Binance’s burn process and when these burns have taken place on the Binance website.

By knowing when the coin burning will take place, traders can potentially know when to sell the coin because lowering the number of coins will increase the value of the BNB, giving them a profit.

Binance Coin is not very volatile

As mentioned earlier, Binance Coin is a relatively safe coin. It doesn’t have the volatility that other cryptocurrencies have.

Because of this, it can mean that it is harder to find key entry and exit points and profit from volatility. 

However, it can still be useful to hold as a trader as somewhere to put your value when the crypto market is going down.

Quite often traders cash out of their crypto when they’ve finished trading or when the market is too unstable. However, the problem with cashing out in fiat is that it can be costly and take time.

By using Binance Coin, traders can store their funds there temporarily until it is safe to trade again.

If you wish to perform a long trade with Binance Coin, the Binance exchange must prosper for you to make a profit. If it doesn’t, it can negatively affect the currency. 

Ideally, you want it to remain stable and not move too much if you want to use it as a discount on the Binance exchange or as a stable place to store your crypto during volatile times.

How well has Binance Coin performed?

binance coin chart

Binance Coin has performed very well since it’s opening. Mostly slow for the beginning but rising a lot later into 2019.

After a disappointing end to 2018, Binance Coin had risen in price by 5% at the end of January 2019.

In February 2019, Binance Coin increased in price by 57% and continued to rise in March, where it increased by 55%. Those are very big movements.

By the second quarter of 2019, prices have been more static with dips in price as well as tremendous rises.

In April, Binance Coin ranged for a period, but by the 17th, the price shot up again and continued trending upwards and ended the month at 25% higher.

So far it seems that Binance Coin may continue this uptrend. Of course, though, no one can guarantee this, and some believe a major correction in price may occur.

Events that have affected Binance Coin’s price

Generally speaking, when most cryptocurrencies are going down, Binance Coin goes up, though this is simply a generalisation and will not always happen.

In May 2019, the Binance exchange fell victim to a large scale security breach and lost $40 million in Bitcoin

It is natural to assume that this had a negative impact on the Binance Coin, but in actuality, it had little effect.

Binance has claimed that all users’ funds will be returned, however, it does bring into question; how secure the Binance exchange is and how secure Binance Coin is to theft?

It seems that the Binance exchange’s performance is simply too good to be affected by negative press, such as the hack.

In fact, in June 2019, Binance had a trading volume of $60 billion.

However, not all the news surrounding Binance Coin is rosy. There are developments in the works that will likely negatively affect the coin.

From September 2019, US traders will no longer be allowed to trade on the exchange which will likely result in a significant dip in trading activity both for the exchange and the coin.

Over 15% of the website’s traffic comes from the USA, far more than any other nation. US traffic is four times higher than in second place, India.

That said, Binance is supposedly creating a new US regulatory compliant platform for US traders. 

At this point though, no one knows what this will look like and if this will involve the Binance Coin or not.

It is quite possible that due to US law, when a new US version of the Binance exchange is launched, BNB may not be available to trade because it will be viewed as a security.

Key points

If you remember anything from this article, make it these key points.

  • Binance Coin was created by the Binance exchange. Traders that use it on the exchange can get a 25% discount.
  • So far Binance Coin hasn’t been affected by negative news about the Binance exchange. Such as the hack that happened in May 2019.
  • Binance Coin has performed very well in 2019. That said, a continued increase in price cannot be expected and the market may correct itself.
  • In the future, Binance may reduce the discount to 12.5%. If this happens, interest in Binance Coin may decrease.

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