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What Is Binance Coin and Is Binance Coin A Good Investment?

15 Min Read
Last Updated March 27th 2021

Is It Worth Investing In Binance Coin (BNB) In 2021?

Binance Coin (BNB) caught your attention? Want to know what Binance Coin is? Wondering if Binance Coin is a good investment? No worries! We at Trading Education are here to guide you on your journey to cryptocurrency trading success.

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

If you want to invest in BNB quickly and easily, check out eToro Exchange!

Contents:

What Is Binance Coin?

How Does Binance Coin Work?

Is It Worth Investing In BNB In 2021?

How Well Has Binance Coin Performed?

Binance Coin Still Has Big Potential to Grow

Should I Invest In BNB?

How Can I Invest in BNB?

Where Can I Trade Binance Coin?

What is Binance Coin & Is Binance Coin A Good Investment? | Key Points

 

What Is Binance Coin?

Binance Coin (BNB) is the highly popular cryptocurrency created by the well-known Binance exchange. BNB tokens can be used to pay fees on the exchange and also to trade cryptos.

Let’s not forget that Binance is by far the largest cryptocurrency exchange in the world, created by Changpeng Zhao. They also offer the most crypto to crypto pairs and have a daily trading volume of $1.5 billion.

The history of BNB is more than curious. Binance Coin was made available to the public for the first time on 25 July 2017 and has the BNB ticker symbol. Interestingly enough, BNB was launched on the Ethereum blockchain as an ERC-20 token.

In Binance Coin’s first Initial Coin Offering (ICO), they raised 15 million within three weeks. Since then, BNB has moved from the Ethereum blockchain to its own Binance blockchain.

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

At the time of writing, there is a circulating supply of 144,406,561 and a market capitalisation of $51.08B, according to CoinMarketCap - making it the 9th largest cryptocurrency.

Why Has BNB Price Gone Up 300% in 2021?

Why has BNB gained so much value in the first two months of 2021, though? Simply because Binance is one of the most popular crypto exchanges in the world. As crypto trading volume iecreased overall, Binance managed to make money. lots of money, from  this action. 

Crypto experts thinks that Binance Coin may continue to go up in value, possibly outpacing Bitcoin price. However, Binance Coin is not goin to replace Bitcoin as the leader of global digital currency. BNB is likely to be one of the big winners in 2021, especially if the crypto market continue to rise.

Read more: How Much Will BNB Be Worth In 2021 And Beyond?

Binance Coin: The Top Utility Token of 2021?

Though many believe that Binance Coin is a good investment and one of the safest cryptocurrencies out there (mainly because of its relative stability), no one can say this for certain. Thus, it’s up to you to decide if investing in BNB in 2021 is worth it.

That being said, BNB is one of the top utility tokens of 2021. It is primarily used to pay fees on the Binance cryptocurrency exchange, with fees paid in Binance Coin on the exchange receiving a discount.

Interestingly, the different types of exchange fees that can be paid with BNB include transaction fees, voting fees for new tokens, commissions, and also fees for launching new instruments.

Perhaps the most appealing aspect of investing in BNB is the fact that traders who make transactions with Binance Coin on the Binance exchange get a discount of 25%. In 2017, this discount was even greater, 50%.

We have to agree that this approach 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, however, how long this discount will continue to be offered. In the future, it may continue to decrease or even stop.

In fact, according to their 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 their white paper also points out that in the 4th year, which would be 2021, the discount will be reduced further to 6.75%.

If this happens, then interest in Binance Coin may stop - unless the developers behind Binance offer another reason to trade or hold BNB.

Does Binance Coin Have The Best Use Case?

Talking about BNB as a utility token, we should also point out that some experts 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 BNB; it can foster a community around it as well. Let’s not forget that Binance Coin’s value is backed by the exchange which has a public address. 

Many cryptocurrencies lack this. In fact, many 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 become really popular.

As mentioned above, BNB has multiple use cases, including facilitating transactions, paying for transaction fees on the exchange, making payments, paying for hospitality services, and so on and on.

 

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 stated earlier, BNB was created on the Ethereum blockchain but has moved to its own blockchain Binance Chain.

Interestingly, this blockchain uses the Tendermint byzantine-fault-tolerant consensus mechanism and has three different types of nodes:

  1. Validator nodes that validate transactions
  2. Witness nodes that witness the process and broadcast transactions
  3. Accelerator nodes owned by organisations and that speed up the process

Note that fees are distributed among all validators.

As BNB was built upon the Ethereum blockchain, it can be assumed that much of the technology behind it is very similar. After Binance switched to their own 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 also mentioned that the Binance Coin network is centralised, which will always be off-putting for some cryptocurrency enthusiasts. Simply because decentralisation is one of the main advantages of cryptocurrencies over fiat money!

That said, in comparison to other centralised coins, Binance Coin has a much better image. The exchange has a lot of financial backing, which can enhance the use of BNB.

Some of the benefits of BNB are quick transactions, seamless experiences, and high security.

Talking about security, we should note that since BNB is used mostly across the Binance ecosystem, one will need a verified account. Therefore, BNB - compared to privacy coins like Monero - limits anonymity and leaves a digital footprint.

Have you considered Buying BNB?

Coin Burning

Talking about technicalities, perhaps coin burning is the most remarkable aspect of Binance Coin. 

Due to the artificial scarcity of cryptocurrencies, BNB vendors have found a way to ensure that the value of the asset rises steadily: BNB tokens are removed through a process called burning.

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

Burning is the opposite of minting. 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. Binance performs 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.

Interestingly, approximately 9 in 10 employees at Binance receive a portion of their salary in BNB.

What results from this is that 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.

Is It Worth Investing In BNB In 2021?

With a market cap of over $51.08B and various benefits, investing in BNB in 2021 is definitely worth it.

Let’s not forget that BNB is one of the top utility tokens and has a wide range of advantages over other digital coins.

At the same time, remember that BNB is an asset with a high risk and high reward investment ratio.

Thus, if you decide to invest in BNB, always do your research and proceed with caution.

Binance Coin Is Not Very Volatile

If you decide to take the risk and invest in BNB, do not forget that, as mentioned earlier, Binance Coin is a relatively safe coin. It doesn’t have the volatility that other cryptocurrencies have.

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

Because of this, it may be harder to find key entry and exit points and profit from volatility. 

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

It is worth noting that 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 BNB 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 its opening: mostly slow for the beginning but rising a lot later into 2019-2020.

After a disappointing end to 2018, Binance Coin had risen in price by 15% at the end of February 2020.

In February 2020, Binance Coin increased in price by 57% and continued to rise in March, where it increased by 55%. Those are very big movements, for sure!

By the second quarter of 2020, 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.

In Febraury 2021, the price of BNB has increased by 200% to reach a record high of $336 per coin.

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

“What has affected BNB prices then?”, you may ask. Generally speaking, when most cryptocurrencies are going down, Binance Coin goes up, though this is simply a generalisation and will not always happen.

Let’s remind you that 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 the hack 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?

Well, 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 February 2021, Binance had a trading volume of more than $360 billion.

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

To provide an example, 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.

On top of that, if there is news regarding the Binance exchange or Changpeng Zhao, it can affect the value of Binance Coin. 

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

Binance Coin Still Has Big Potential to Grow

As the cryptocurrency market continues to develop, leading crypto exchanges like Binance have the potential to grow. If, as announced, institutional investors and big banks enter the cryptocurrency market in the coming years, this entrance would cause increased demand on the buying side of Binance Coin.

An additional factor is that Binance has promised to use about 20% of profit to buy back the Binance Coin about 50% units. This should also give prices a big boost in the future if Binance delivers on its promise!

In the end, let’s not forget that digital currencies tend to follow bull and bear cycles, so one should always keep an eye on technical indicators, fundamentals, crypto news, and market sentiment.

How Much Will BNB Be Worth? 

While nobody can make accurate price predictions, you may want to know how much BNB will be worth in 2021.

With a strong community of supporters and a positive market image, BNB may rise in value. 

Wallet Investor, for example, claims that BNB will grow by 77.31% in 2021.

Gov Capital gives a predicted price at $727.53 by the end of 2021, which means that if one invests $100 now they will gain $1850.34 in December 2021.

Digital Coin Price also predicts that BNB will reach new highs and hit over $600 per coin in 2022.

Should I Invest In BNB?

Given its positive future and advantages over other cryptocurrencies, BNB offers some great opportunities for investors.

But just because you can, that doesn’t mean you should invest in Binance Coin. Remember there’s no 100% profitable investment.

Before you open an account and invest in any asset, you should consider its risk-return trade-off and decide on a risk management strategy to success. 

How Can I Invest in BNB?

If you decide to invest in BNB, finding a place to buy Binance Coin is easy. 

There are different ways to invest in BNB either in the short or long-term, with cryptocurrency exchange platforms like eToro being the safest places to invest in crypto.

Naturally, Binance Coin traders will buy BNB as an investment option if they think that the price is likely to increase from the current exchange rate.

Where Can I Trade Binance Coin?

Now you know more about Binance Coin and all the aspects of Binance Coin investment. So, if you consider trading Binance Coin, we at Trading Education recommend using regulated exchanges, such as eToro

eToro – Best Broker to Buy Binance Coin BNB 

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eToro have proven themselves trustworthy within the crypto industry over many years – we recommend you try them out.

Virtual currencies are highly volatile. Your capital is at risk.

Learn To Trade Binance Coin With eToro

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Whether you’re an experienced crypto investor or taking your first steps into this sector, Binance Coin is potentially a strong contender for your investment portfolio. BNB investors can also build a diversified portfolio with the most popular coins.

We hope this guide has helped demystify this major crypto coin for you. If you're feeling inspired to start investing in BNB, or this article has provided some extra insight to your existing investing knowledge, you may be pleased to know that eToro provides the ability to invest in crypto assets and CFDs on up to 90+ cryptocurrencies

Key Points

  • Binance Coin is one of the top utility tokens created by the well-known Binance Exchange.
  • Binance Coin was originally created on the Ethereum blockchain but later moved to its own blockchain, Binance Chain.
  • BNB Coin is the ticker symbol of Binance Coin.
  • BNB tokens are regularly destroyed or burned to ensure that BNB increases in value steadily.
  • BNB has witnessed some impressive growth and, according to some price predictions, it has some remarkable future potential.
  • If you decide to invest in BNB, we at Trading Education can guide you on your journey and help you sign up with a reputable broker like eToro.

Would you invest in BNB in 2021?

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FAQs

Is Binance reputable?

Yes, Binance is one of the most reputable and fast-growing crypto exchanges. Created in 2017, Binance has grown to a crypto giant that offers more than a hundred cryptocurrencies to buy and trade.

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