Binance Coin is not only the novel token of the largest cryptocurrency exchange. It is also the third largest digital asset in the world with a market capitalization of $85 billion.
This article takes an in-depth look into Binance, the third most valuable digital asset, its core areas of business, and ─ most importantly for prospective investors ─ the merits and demerits which can help answer the question: Should I buy Binance Coin?
Binance Coin (represented by the ticker symbol, BNB) has performed extremely well in 2021 having returned 1372.44% gains Year-To-Date (YTD).
BNB began 2021 with a relatively lower price ($37.37) when compared with other cryptocurrencies. The digital asset has been able to cross several price milestones in the process ($100, $200, $300, $400 and $500) and the next target is $600.
Such milestones have seen the digital trading asset bring massive gains to HODLers (long term holders of assets) who made a purchase of the coin in the earliest days of the year.
BNB, as well as other altcoins such as Ethereum (ETH), Cardano (ADA), Tron (TRX), EOS.io (EOS), Tezos (XTZ), Ripple (XRP) and Stellar Lumens (XLM), have made strong gains to wipe out losses suffered in the peak days of the pandemic. Such a rally was buoyed by the crypto boom of 2021 which has so far been led by parent crypto (BTC) whose price spike has slowed down in recent weeks.
Binance Coin was created to serve as a token which powers the Binance Exchange which runs on the Binance Smart Chain.
Up 50% in the last 30 days and more than 800% in the last 13 weeks, much of BNBs rally was down to a transaction worth $7.5 million which involved a transfer of 16,500 BNB from Binance to FTX, as per data retrieved from Whale Alert (blockchain and crypto analytics platform).
Will Binance continue to soar in the coming days? Will it continue to bring gains to investors in the long term?
Most importantly, for prospective investors ─ what are pros and cons which can help answer the question: Should I buy Binance Coin?
Binance at a Glance
Under this section, we are going to take a brief look at the formative years of the cryptocurrency exchange and its novel token (BNB), the accomplishment of its roadmaps as well as BNBs performance over the years.
Binance was founded in 2017 by Chanpeng Zhao. Normally referred to in the media sometimes as CZ, he is a developer with extensive experience in the creation of high-frequency trading systems.
He helped build some of such systems for several brokers through Fusion Systems (a company he owned in 2005). Zhao previously served as the Chief Executive Officer of OKCoin (one of China’s largest exchanges) and was a part of the team behind Blockchain.info.
What is Binance?
Binance is a cryptocurrency exchange platform. It is the largest regulated of all the cryptocurrency exchanges in the world. The exchange is federally regulated in all but 15 countries, Binance combines an easy to operate interface and as well offers a variety of coins in a highly secured exchange. This has played an integral role in maintaining its lead as the largest in the crypto exchange space.
What is Binance Coin?
Binance Coin is a cryptocurrency that is represented by its ticker symbol (BNB) and can be used to trade as well as pay fees on the Binance Exchange. While several people including authors on the various financial news outlets confuse Binance with Binance Coin (BNB), Binance is the exchange and Binance Coin (BNB) is the cryptocurrency. It is extremely popular to investors who have been in the investment game for long. Aside from its primary use on the exchange platform, BNB can also be used as a digital currency when investing in stocks, Exchange Traded Funds (ETFs) and other assets.
Read More: How to Invest in Binance Coin
What Is The Purpose Of the Creation of BNB?
Binance Coin (BNB) was created with the intention of operating a native crypto asset called BNB which is meant to offer an alternative way to pay for fees charged to traders using the Binance Exchange.
Where Does Binance Operate?
Chanpeng Zhao initially based his operation in China. After news started circulating on the possible ban of cryptocurrencies in China, Zhao moved servers and headquarters of the project to Japan after the ban became official in September 2017.
Japan soon followed China after cryptocurrencies started gaining mainstream attention and became a threat to the centralized financial institutions across several countries. With the Financial Security Agency (FSA) of Japan announcing that “With effect from June 2018, there will be an outright ban on all cryptocurrencies which provide a sufficient degree of anonymity”, offices were set up in Taiwan.
Led by its founder and CEO, Binance signed a memorandum of understanding (MOU) with the government of Bermuda and followed this up with another MOU with the Malta Stock Exchange to develop a platform for trading security tokens. Malta currently serves as the headquarters of Binance.
How Many Binance Coins Are In Circulation?
BNB currently has 91% as circulating supply which stands at 154,532,785 BNB from a total supply of 170,532,785 BNB.
Binance Coin (BNB) Performance from 2017 to Date
It is extremely difficult to find information on the first trading day of Binance Coin (BNB) since numerous finance websites provide different data.
As per data retrieved from CoinTelegraph, BNB started trading on 14th August 2017 at a price of $1.43 with a recorded trade volume of $2,900.
Since that day, traders and investors with an interest in the potential of Binance have been through good times (rallies) and bad times (recessions) on the part of the cryptocurrency.
Like Bitcoin (BTC) and Ethereum (ETH), Binance Coin (BNB) has had its share of hacking attempts. Unlike other cryptocurrencies, BNB has been able to maintain its price which has been good for a crypto trading asset since it’s in a market that has volatility as one of its components.
Despite moving servers and headquarters (business operations) from one country to the other while facing an uncertain future for the whole crypto finance space, Binance Coin has exceeded expectations. BNB has surpassed many price forecasts by analysts who did not think much of the cryptocurrency at first. Presently, several financial gurus back the digital asset to break more milestones in the near future and bring more gains to investors.
After starting 14th August 2017 with a price of $1.43, BNB closed 31st August 2017 at a price of $2.35. With major cryptocurrency Bitcoin (BTC) rallying towards the end of the year, other altcoins such as BNB followed. The crypto trading asset closed on 31st December 2017 at a price of $8.48. In its first year of trading, BNB returned 493.007% gains to investors.
The year 2018 brought new milestones for Binance as it became the largest cryptocurrency exchange with $1.3 billion in market capitalization. More than 240,000 people signed up in the space of one hour to be able to enjoy the features of the exchange. Considering Binance Coin (BNB) offers one of the alternative ways to pay for fees on the exchange, activity on the cryptocurrency increased substantially.
In March 2018, a hacker utilized multiple attack vectors to overwhelm the network. Fortunately, Binance had strong protection in software which made this hack attempt unsuccessful.
In the same year, BNB gained a new status of being used as COLLATERAL for crypto-backed loans. On 1st July 2018, NEXO (the world’s largest and most trusted lending institution in the digital finance industry) added Binance Coin as collateral for instant crypto-backed loans. BNBs role was to provide borrowers with a 50% discount which entitles them to a 30% dividend from the net profit of the company.
On 29th August 2018, it was reported by Fortune that Binance and three other big exchanges have joined forces to fund a stablecoin called TERRA. This was an initiative to get several people to adopt digital money without the notorious volatility associated with BTC and other altcoins.
BNB started 1st January 2018 with a trading price of $8.75. Despite the huge milestones accomplished by its cryptocurrency exchange, BNB being used as collateral and the parent company funding major projects in the crypto finance landscape, BNB succumbed to the bearish outlook of the decentralized finance market. The digital asset shed 30.0571% of its price and traded at $6.12 at the end of 2018.
In January 2019, Binance got into a partnership with Simplex (an Israel-based payment processor) to enable the use of debit cards such as MasterCard and VISA to purchase cryptocurrencies.
Binance Jersey was announced in January 2019 with a primary aim of expanding its influence in Europe. Binance Jersey is a single entity which does not thrive on the features of Binance.com exchange and offers fiat-to-crypto currency pairs which includes British Pound and Euro.
On 7th May 2019, Binance faced a second hacking attempt. This time, there was a large scale security breach where hackers stole 7000 BTC worth $40 million. The hacking resulted negatively on BNBs price as it decreased to $18.79 on May 8 after closing at $20.68 on May 7.
In September 2019, Binance started to offer perpetual futures contracts (as per information retrieved from Binance Academy, this is a special type of futures contract, but unlike the traditional form of futures, it does not have an expiry date).
The Binance Exchange ended the year on a strong note by making an acquisition of WazirX (a Bitcoin exchange in India).
The hacking incident could not do much to hinder the progress of BNB. In the process, BNB opened on 1st January 2019 at a price of $6.21 and closed the year, December 31 2019 with a trading price of $13.68 (120.29% increase in price).
In 2020, with the pandemic in section in the months of March and April, Binance continued to make successful partnerships with financial technology (FinTech) corporations and ended the year with a new all-time high of $37.76.
BNB has performed well in 2021 and at the time of writing has a trading price of $550.25 having gained 1.11% of its price. Trading between $526.33 and $556.83 in the last 24 hours, BNB has a trade volume of $5.05 billion, market capitalization of $85.13 billion, diluted market capitalization of $93 billion and reached an all-time high of $637.44 on 12th April, 2021.
Let us take a look into the pros and cons which makes Binance Coin an asset which you as a trader or investor can consider adding to your portfolio of investments.
Pros of Buying Binance Coin
There is no asset (crypto, stock, commodity, metal, indices) that was spared during the peak of the pandemic. There was a plummeting in the price of all assets. In the crypto world, Bitcoin (BTC) as the pioneer of the space led the way with a huge sell-off which cut its price into two. Just as it always happens, altcoins followed in the same direction.
In February 2021, Trading Education did a study on Binance Coin with a primary objective of finding answers to the question, is Binance Coin a Good Investment? At the time, BNB had a trading price in the range of $280 and $295 and a market capitalization of $45.652 billion. With a present market cap of $85 billion, it means there has been an 86.48% increase in the overall market valuation of the asset.
With that said, BNBs price is affected by several factors. What drives its price?
There are several pros of Buying Binance Coin, let us take a look at its future prospects.
✅ Binance Records More Volume than Other Exchanges
As the largest cryptocurrency exchange in the world, Binance records more than $1 billion in trade volumes daily. It is extremely essential to note that it competes with some of the most popular exchanges in the world such as Coinbase Pro, HBTC, Huobi Global, Gemini and Kraken among others.
To demonstrate the extent of activity on the exchange, Statista (statistics portal for market data and consumer reports) conducted a study on the first one hundred cryptocurrency exchanges in the world in terms of trade volumes recorded in a single day. Monday, the 22nd day of February 2021 was chosen for this study based on 24 hour volume in the world.
The Binance Exchange came out on top with a recorded trade volume of $28.85 billion in a period of 24 hours. HBTC took 2nd place with $14.44 billion and the rest followed in a numerical order. Hydax Exchange ($12.19 billion), Dsdaq ($11.97 billion), ZG.com ($11.5 billion), Xtheta Global ($11.07 billion), Mexo Exchange ($10.81 billion), Bidesk ($10.19 billion) and the popular Huobi Global came in ninth (9th) place with $9.47 billion and 10th was VCC Exchange with a volume of $7.5 billion.
According to experts on Cabot Wealth, “Trading volume is a thorough reflection of pricing momentum. When stock market activity – i.e., volume – is low, investors anticipate slower moving (or declining) prices. Conversely, high volume of a particular security can indicate that traders are placing their long-term confidence in the investment”.
Inasmuch as the experts were referring to stocks, their assertion is still related to trading. As a result, a high volume of an exchange indicates long-term confidence in the cryptocurrency exchange (asset). Binance is one of the most trusted exchanges and has a wide range of cryptocurrencies with new ones added continuously.
With the Binance Exchange available on Windows, Android and iOS on Apple, and the launch of the Binance Futures Mondays & Tuesdays Bounty Promo which will offer USDT 5,000 Bonus Jackpot, more users would be trooping into Binance to contribute to the volume with an aim of winning. Such activity may see the cryptocurrency exchange surpass its record in February 2021.
Check Out: Why Binance Coin is Going To Explode
✅ Binance Smart Chain Scales Faster than Most Blockchains
Having started as ERC-20 token on Ethereum, processing transactions through Binance Coin (BNB) was relatively slower when compared to the scalability of Ripple and others. This is because Ethereum relied on the template of Bitcoin (BTC) for its blockchain technology. As a result it has the same technology pitfall which is associated with BTC. Ethereum 1.O runs on the longstanding SHA-256 proof-of-work algorithm.
Proof-of-work (POW) has one problem and is called scalability issues. After BTC gained grounds in the concept of decentralized finance, several people decided to test it and this resulted in high congestion which to this day sees BTC process 4 to 6 transactions per second. Ethereum’s 1.O network processes approximately 30 transactions per second (TPS).
Binance Smart Chain launched in September 2020 and has the capacity to process approximately 1.4 million orders per second. Additionally, the Binance Smart Chain comes with high standards of security and safety with multi-tiered and multi-clustered architecture.
Scaling is directly linked to fees. If a network can scale relatively faster than another, it means that it would have a lesser fee than its competitor. Evidently, as per data retrieved from YCharts, Ethereum has an average transaction fee known as gas of $16.72.
On the other hand, “By default, if you hold BNB in your account, your trading fees will be automatically deducted from your balance. Subject to changes, you get a 25% discount from your trading fees if you use BNB to pay for your trading fees”, sourced from Binance US.
This gives the Binance Smart Chain a competitive advantage over Ethereum's Network when users decide to use decentralized exchanges such as PancakeSwap (Binance) over Uniswap (Ethereum). Users will pay more in fees in ETH than they would in BNB.
✅ Binance Coin (BNB) Can Be Used as a Collateralized Asset
In 2018, several financial technology organizations started using Binance Coin (BNB) as collateral for instant crypto-backed loans.
NEXO tags itself as the world’s largest and most trusted lending institution in the digital finance industry. With an aim of disrupting the financial system, one bit at a time, NEXO has $12 billion in assets under management, over 1 million users, operates in over 40 fiat currencies, has more than 100,000 social media followers and is available in more than 200 countries.
On the 12th of July 2018, PRNEWSWIRE reported in an article with the title, Nexo Adds Binance Coin as Collateral for Instant Crypto-Backed Loans.
Nexo is backed by CREDISSIMO (a leading European FinTech Group which uses innovative proprietary technology to deliver unmatched efficiencies and state-of-the-art consumer finance solutions) which operates under strict compliance with supervision by several European banking and financial services regulators.
What Nexo does is to assist investors to unlock the value of their wealth by providing them with instant loans in USDT (Tether), USD and EUR against their crypto-holdings. Rather than sell their assets, investors can pledge them to Nexo and obtain immediate liquidity and as well keep the future value of the increment in price of their tokens and cryptocurrencies.
Nexo users were already borrowing huge amounts by using NEXO’s Dividend Token, Ethereum (ETH) and Bitcoin (BTC) before Binance Coin was added.
Binance Coin (BNB) provides borrowers a discount of 50% and entitles them to a 30% dividend from the net profit of the company.
YouHodler is a Swiss-based company and FinTech platform which is focused on crypto-backed lending with “stablecoin” loans (PAX, USDT, USDC and TUSD), fiat (EUR and USD), crypto (BTC), high-yielding savings accounts as well as crypto/crypto and crypto/fiat conversions.
On 29th October 2019, YouHodler welcomed BNB to its list of collateral and conversion options. It was announced via their handle @YouHodler on social media platform (Twitter), excerpts of the tweet go, “@Binance coin BNB is now integrated at YouHodler. Get a loan with $BNB, convert into $USDT or #BTC, receive up to 4.2% interest in #BNB. Want more? Wait for a contest for the BNB community. Stay tuned with @YouHodler”.
CEO of YouHodler, IIya Volkov stated that “BNB does a great job integrating crypto into the traditional finance world, so BNB will grow in importance over time and now, our users can take advantage of this.”
INLOCK claims it's one of the safest places when it comes to crypto-backed loans. INLOCK was on the ERC-20 network with BNB in February 2019 but dropped the ERC network support and switched to Binance Smart Chain.
In October, 2019 INLOCK Platform announced that BNB can now be used as collateral for loans. This is backed by providing a platform whereby customers can store a combination of their cryptocurrencies in a single contract to lessen the negative effect of short-term price fluctuations.
In June 2020, Kava Labs’ DeFi Lending Platform went live with BNB Collateral Support. The platform allows network participants to earn rewards, USDX (Kava’s crypto-backed stablecoin) loans and Binance Coin (BNB Collateral).
A representative from the company said “With this launch, Kava Labs aims to open the doors of Decentralized Finance to the BNB community and soon it plans to do the same for the greater crypto space”.
This adds up to the increased usage of BNB and with more partnerships to be added in 2021, there would be an increment in price and the overall valuation of the asset.
✅ Binance Coin (BNB) Has a Maximum Cap Which Is Subject to Burning
A total of 200 million Binance Coins were distributed, 50% which is represented by 100 million for Public Sale, 40% which is represented by 80 million for the founding team and 10% which is represented by 20 million for angel investors.
BNB currently has 91% as circulating supply which stands at 154,532,785 BNB from a total supply of 170,532,785 BNB due to token burning.
With such an activity to be carried out quarterly, a 100 million supply cap would be reached in the not-so-distant future. Once there is a maximum supply, the laws of demand and supply are going to take effect on the price of BNB.
As more people demand the crypto trading asset, the price of the digital asset will go up substantially since more people would purchase BNB at a price set forth by holders (sellers) of the asset. This makes BNB an asset such as Bitcoin (BTC) which can also function as a store of value for the foreseeable future.
✅ BNB is not as volatile as other Cryptocurrencies
In simple terms, VOLATILITY describes how quickly and by how much an asset can change in price in a short period of time. Cryptocurrencies are normally referred to as volatile.
Binance Coin (BNB) operates in a decentralized world but it is centralized. Binance is regulated and complies to financial standards in all but 15 countries globally. This is the main reason why it is the largest cryptocurrency exchange; it has not been embroiled in any case particularly with the Securities and Exchange Commission (SEC) of the United States of America.
Inasmuch as moving from $37.37 at the beginning of the year to a new all-time high of $637.44 on 12th April 2021 is a huge leap in price, Binance Coin unlike Bitcoin (BTC) which relies on speculation (demand and supply) and first mover advantage is aided in usage through decentralized finance (DeFi) applications.
A decentralized protocol or application such as PancakeSwap (CAKE) which has a price of $25.16, recorded volume of $998 million, market capitalization of $3.8 billion and more than $6 billion in Total Value Locked (TVL) in decentralized finance (DeFi) plays a key role in the valuation of the asset’s price.
With Chanpeng Zhao skillfully updating followers of the cryptocurrency and its network on social media platforms (especially Twitter), as well as overseeing all the activities around the trading of BNB, the asset will continue to see a steady rise in price with real-world explanation.
Binance Coin will likely not succumb to the meteoric rise of certain cryptocurrencies such as Dogecoin (DOGE) and others which are just being pumped up by an army of fans on Reddit and Twitter, at least for the foreseeable future.
Read Also: What Will Binance Coin Be Worth In 10 Years?
Cons of Buying Binance Coin
As a result of being centralized and being compliant with the regulatory standards of most countries, it is extremely difficult to find negatives with Binance. With that said, no cryptocurrency is perfect and therefore Binance with its Chain and novel token has certain flaws which can impact its price in the future.
❌ Binance Has Been Hacked Before
In May 2019, hackers made off with $40 million worth of 7,000 BTC by performing a large-scale security breach. Before that, the Technology Officers at the company felt a breach was impossible but it happened.
Binance has since taken adequate steps to provide high standards of security and safety with multi-clustered and multi-tiered architecture which delivers a high processing throughput.
Binance is the largest and most trusted crypto exchange for the time being. If you can, as a trader or investor, spread your coins across several trusted cryptocurrency exchanges because as companies find credible software solutions for their systems, hackers also find new and improved ways of breaking into such systems.
By spreading your risk, you balance losses. Cryptocurrency investments of all kinds are risky whether the team behind the project is centralized or decentralized.
❌ Binance is facing a Regulatory Problem in Thailand
On Wednesday, 7th April 2021, it was reported by the Bangkok Post in an article with the title SEC issues warning on Binance’s legality. The Securities and Exchange Commission (SEC) in Thailand has labeled Binance as illegal after it found out that Binance accepts Thai baht deposits without going through the necessary regulatory standards.
The problem is, there are many active account holders on the Binance Exchange who come from Thailand. Unfortunately, the numbers are not that strong for Binance to opt for a license in Thailand like it did in the United States (since the number of active users was into the millions).
According to Thai authorities, it has failed to go through the Know Your Customer (KYC) phase of the account creation process which may lead to illegal activities.
For the time being, Thai regulators would like to have a discussion with Chanpeng Zhao (CEO) and other stakeholders to resolve the issue.
This does not bode well for Binance and must be resolved quickly in order not to trigger new compliance rules which may affect the price of its novel token, BNB.
Cryptocurrency trading and investing is risky and as an e-learning organization, we advise that you invest what you are willing to lose.
How to Buy Binance Coin?
Trading Education recommends eToro as a licensed brokerage that can help store your coins in a safe and secure environment.
The first step is to SIGN UP;
The second step is VERIFICATION. Kindly go through the phase called Knowing Your Customer (KYC). Provide a government-issued identification card that has your full name, date of birth, signature as well as the date of expiry.
The third step is to DEPOSIT FIAT CURRENCY (EUR, GBP or USD).
The last step is to NAVIGATE to BNB and purchase your first BNBs and it will be processed and stored in your account.
BNB Price Predictions: What Are Analysts Forecasting for Binance Coin?
Let us take a look at the current price forecasts of analysts after BNB reached new all-time highs in the months of February, March and April 2021.
Analyst ARSLAN BUTT of FX Leaders foresees a bearish correction for Binance Coin price in the course of the year, Fibonacci retracement as well as profit taking by some long term holders of the Binance Coin digital asset. This will see a slight increase from the new milestone to trade in the price range of $500 to $600 by the end of the 2nd quarter.
The analyst sees a further improvement in the price of BNB which will see the Binance Coin asset touch the $1,000 price milestone by the end of 2021. The main drivers behind this are 50 EMA support and ABCD Pattern completion.
Digital Coin forecasts the value of Binance Coin BNB to reach $721.9 by the very end of 2021, $830 in 2022, $975.33 in 2023, $1,433.53 in 2025, $1,803.22 in 2027, $2,041.70 in 2028 and $2,350 in 2030.
Wallet Investor foresees a price correction in the months leading up to the end of the 2021 which will see Binance Coin BNB shed a slight percentage of its current trading price to close the year at an average price of $385.883.
Experts at the online portal believe Binance Coin BNB will be worth at an average price of $496.895 by the end of 2022 before increasing substantially to end 2023 at a price of $607.270 and close 2024 at a price per coin of $718.092.
The Economy Forecast Agency predicts Binance Coin BNB to be valued at $2,305 by the end of 2021, $2,310 by the end of 2022, go through a slight bearish period in the early months of 2023 before new investor interest takes the asset’s price to $3,455.
Trading Beasts has forecasted Binance Coin BNB to end 2021 with an average price of $400.851, end 2022 with an average price of $493.341, 2023 with an average price of $604.582 and 2024 by having a price of $714.188.
Check Out: What Will Binance Coin Be Worth In 2030?
The Bottom Line: Should You Buy Binance Coin?
As per the predictions of experts, Binance Coin is likely a buy and can be considered by any trader or investor as an asset with a potential in the long term which can add value to any investment portfolio.
There is no crypto trading asset that is perfect. Binance Coin has a competitive advantage as it is behind the largest cryptocurrency exchange of choice for experienced and novice investors.
The performance of BNB is not primarily centered on speculation of demand and supply, but by real world usage as well as the performance of decentralized protocols or applications (DAPPS).
Decentralized exchange PancakeSwap and other DeFi applications such as PancakeBunny, Autofarm, Value DeFi, 1inch Network on BSC, Swamp Finance, Belt Finance, Soteria, Goose Finance and Ape Swap among a host of great applications records daily volumes which signals investor confidence and interest in the DAPPS which has a reflection in the market valuation of Binance Coin as a whole.
Several analysts at The Economy Forecast Agency (EFA), FX Leaders and Digital Coin have made bullish predictions about the future of Binance Coin. At least, a price range of $500 to $600 is the minimum price forecast by these analysts.
With the introduction of Binance Futures Mondays & Tuesdays Bounty Promo, new users would be trooping onto Binance’s platform to increase activity on the exchange which would reflect in BNBs price.
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