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Binance Coin has been losing steam going into the back end of 2021. It has been treading water around $400, but over New Year lost further ground. There may be optimism for traders though as the coin as turned around and could be building some momentum.

Binance was created in 2017 and its coin has become of the biggest cryptocurrencies on the street. It originally started as an Ethereum ERC token before it migrated to the Binance blockchain. It is now used to power transactions on the influential Binance trading platform.

Binance Coin is mainly used to pay for transaction fees on the Binance platform, although it is also used as a utility token on the Binance Smart Chain. It shares the same utilities as other leading coins – e.g. passive income – but can also be used to buy goods and services at a limited range of retail outlets and online businesses.

Why has Binance Coin been successful in 2021?

Part of the success of the coin in Q1 last year seems to have been down to a wider use case – i.e. it was being employed further afield than the Binance platform. For example, it was powering Dapps, DeFi and smart contracts.

At time of writing Binance Coin was trading at $462, and it has a market cap of $77bn (according to price data from the CEX.io platform). It is currently the fourth largest cryptocurrency in the market, right behind Tether ($78bn).

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Like some other successful coins, Binance Coin has been set up to ensure a limited supply, so 20% of profits are used to buy back and in fact ‘burn’ coins. The objective it to burn 100m coins to reduce supply and fuel demand.

Binance Coin had a spectacular year last year, demonstrating its potential as a speculative asset for traders. This time last year it was trading at slightly over $40. It ascended to a peak of $672 in May, before it slumped to trade in the $280-320 range in the summer. Real interest in Binance Coin picked up again in October and we saw a second big rally.

Has Binance Coin been affected by the wider crypto sell off?

Like Bitcoin, Binance Coin has been seeing something of a sell off in recent weeks. The question is whether the small rally seen over the last few days will lead into something bigger.

Cryptopredictions is sounding bullish: it reckons Q1 performance will see the coin trading in a range between $411-614, with an average price of $488 in February. That is not a huge gain on levels we are seeing right now, unless you are trading with leverage.

Binance Coin – or BNB – is really meant to underpin the Binance ecosystem and its users receive a discount of up to 25% if they transact using the coin on the platform. If it is going to break out over historical highs, investors are likely to want to see a wider utility case – e.g. Binance is launching a Visa debt card that investors can link to their Binance accounts.

In many respects, Binance Coin owners are still really betting on the expansion of Binance itself, which in turn is buying up pieces of the crypto world – e.g. Indian crypto exchange Wazir X. With a further $1 billion committed for further growth in 2022, watch this space.

Related

Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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