Binance Coin Bull Run Explained
By Alberto Cellini on ALTCOIN MAGAZINE
It’s been a long run for Binance so far. Born roughly 18 months ago, it is now the most successful and profitable among crypto exchanges. According to recent data, in 18 months grew by 10-fold in organic and spread across 43 countries in very small and autonomous teams. Changpeng Zhao, his founder know on Twitter as CZ, is one of the most renown faces and voices in the crypto space and he’s taking part to any kind of broadcast, interviews, events that matters on a daily basis. Some consider him an evangelist, others a shady character, the facts are that he gave birth to one of the fastest growing companies of all times.
It is clear to me that our era is seeing a shift from institution-driven to individual-driven mass opinion creation processes, in which thought leaders like CZ embody the voice of the times: the crypto revolution in this instance. And this might be one factor contributing to the current skyrocketing growth of Binance.
Binance’s Team is very busy trying to tick all the milestones in its stellar roadmap that among others includes: the launch of Binance Chain and Binance DEX, Binance Launchpad to support ICOs, integration with Simplex that allows Fiat-to-crypto trades, the launch of a crypto-to-crypto OTC desk for large investors.
Besides the profits and growth metrics, the success of Binance is reflected in the price of the BNB token, one of the elements of Binance’s revolution enthusiastically welcomed by the crypto space.
Binance Coin (BNB) is a utility token that has value primarily in the Binance ecosystem and as a trading asset. It was ICOed in July 2017 and it’s an ERC-20 token with a limited supply of 200M tokens.
BNB allows users to pay for fees on the exchange. The incentive to use BNB instead of paying fees with the trading tokens is that BNB is granting a discount of 50%. The discount decreases with every year of your membership and by the 5th year, the discount does no longer exist. In this way, Binance makes sure that the token is relevant to users and its adoption occurs earlier rather than later. In addition, to reward buyers of BNB the company periodically buys them back using the profits generated in the period, creating scarcity that might trigger appreciation.
BNB is a remarkable example of utility token. It is a useful tool for Binance’s users and it gains its value within Binance environment, via its usage. However, it must be underlined that it’s not a security. It is not a share in Binance’s equity, therefore, it does not give its holders right to future profits nor voting rights in Binance’s board.
I’d define BNB and utility tokens as a “quantums of utility” that represent part of the value that the company creates and delivers among it, customers and holders. Digital representations of present and future value that an environment is able to generate.
To show how much the Binance galaxy believes in this digital representation of value, CZ disclosed that 90% of Binance employees accept BNB as part of their compensation. This creates an advantage for both the company and the employees. The company reduces part of the cost of salaries by using BNB instead of fiat, while employees benefit from earning an asset highly marketable with high growth potential. Growth that themselves are fueling with their hard work. The concept is similar to a stock option with the difference that it is not a stock and it doesn’t carry any option with it. (CZ didn’t disclose anything lockup periods though, but I argue that to BNB to represent a real benefit, lockup should be relatively small).
Not only employees understood the potential of having BNB. Investors as well went crazy about BNB in the last trimester.
At the time of writing (Mar 3, 2019) BNB trades at $14,70 with daily volumes around $230M. In the last 365 days showed a correlation of 0.65 with Bitcoin and 0.69 with the market (a proxy made of the 200 major coins). To give a comparison ETH registered 0.86 with BTC and 0.96 with the market. The volatility over 365 days was 103%, in line with the top 10 coins (Bitcoin excluded). During the last 30 days, BNB value grew by 80% and a stunning 193% in the last trimester with a pretty stable level of volatility, around 5–7%. It now sits on the 7th place in CoinMarketCap ranking, very close to overtaking Bitcoin Cash.
This doesn’t surprise me. As utility tokens get their value from the ecosystem they serve, the milestones I mentioned are promising that this ecosystem will enlarge considerably in the midterm and so the potential utility linked to the BNB.
I can just try and guess the functionalities BNB might get in the future when the blockchain, the DEX, and the launchpad will be up and running. But I will forget many, almost for sure.
To me, the comparison current utility vs. the utility that BNB might offer in 18 months is explaining how BNB managed to double its value in 1 month. Of course, assuming that the team will not lose its pace.
Has the market overreacted to this incredible series of positive news? Might be. It is safe to assume that it will adjust in the next weeks, but this fact tells me one thing: the crypto market is awake and very eager to catch opportunities like this. BNB is now representing a small gateway for this wave of investments and many good projects will soon get to point of making credible promises to the market. Whenever regulators will give clear guidelines for that to happen in full protection of customers, that will be an interesting moment.
Please bear in mind that what your read is not financial advice as I’m not a financial advisor. Articles like this should be part of your own decison making process.
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