The Long-Term Bullish Case for Binance Coin (BNB)

Binance Coin (BNB/BTC) is one of the few altcoins that are melting people’s faces and leaving many in disbelief. The coin is up by over 100% year-to-date, and it is looking to print a fresh all-time high. From a technical perspective, the market is on a strong bull run with more room to grow.

However, is this run supported by strong fundamentals or is Binance Coin just another pump and dump scheme? To answer this question, we conducted an in-depth research on the altcoin. We looked at Binance Coin’s current state and what it could be in the future. We discovered its tremendous potential that can be realized with the right man at the helm of the project.

In this article, we present the long-term bullish case for Binance Coin.

Create Demand

Before we discuss what Binance Coin can be, let’s look at what it is.

The coin is the brainchild of Changpeng Zhao, the CEO and founder of Binance; the world’s largest cryptocurrency trading exchange by volume. Unlike Bitcoin or Cardano, Binance Coin is not a revolutionary payment system nor a platform for decentralized applications. In a nutshell, the altcoin is a discount token for users of Binance.

Users can purchase Binance Coin and use it to pay for fees when transacting in Binance including trading, listing, withdrawing and so on. Those who pay in Binance Coin receive considerable discounts. Refer to the table below for more details on discounted rates:

Year 1st 2nd 3rd 4th 5th
Discount Rates 50% 25% 12.5% 6.75% 0%

Source: CoinSwitch

If you’re not using Binance Coin, each trade carries a transaction fee of 0.1%. With the discounted rates using BNB, your savings can accumulate both in terms of trading frequency and volume. This makes BNB very attractive to market makers, active traders, and even investors.

With this strategy, Changpeng Zhao leverages his exchange to create demand for Binance Coin. As of December 2018, Binance has 313,000 daily active users and an average daily trading volume of $664.4 million.  

Top spot trading exchanges by volume

Source: AmbCrypto

While we don’t know exactly how many traders pay transaction fees in BNB, the fact that the exchange has over 300,000 daily active users partially explains why Binance Coin has been on a surge. If there’s demand for the exchange, there’s a demand for its coin.

Reduce Supply

Changpeng Zhao fuels demand for BNB further by burning coins every quarter. The supply reduction measure helps ensure that the trend of BNB remains healthy for the long-term.

The incineration of Binance Coins will continue until 100,000,000 Binance Coins are burned. That number represents 50% of the total Binance Coins ever issued, which was 200,000,000. So far, almost 11 million BNB have been incinerated.

Quarterly coin burns

Source: Binance

Creating demand while reducing supply is a powerful one-two punch that can help keep the market bullish. However, is this enough to push Binance Coin to greater heights in the coming years? Changpeng Zhao knows it is not, which is why he and his team are working hard to build their decentralized crypto exchange.

Corner the Market

One of the biggest obstacles of mass crypto adoption is safety. For an average Joe to trade crypto, he must follow these steps:

  1. Signup and login to an exchange
  2. Send crypto to an exchange
  3. Trade crypto
  4. Withdraw crypto to a wallet

Somewhere between steps two and four, your assets are vulnerable due to the nature of centralized exchanges. Someone can hack the system to steal your coins. In 2018 alone, almost $1 billion have been stolen in crypto hacks. If your coins are stolen, it is very unlikely that you’ll recover them.

On top of that, users have to worry about shutdowns (such as the famous Mt.Gox improsion) and other issues such as the sudden death (recent case of the Quadriga exchange CEO) of an exchange’s CEO. There are so many factors threatening a person’s holdings in an exchange. Crypto enthusiasts are aware of these risks, but they tolerate the risks because an attractive alternative does not exist…yet.

Binance Decentralize Exchange (DEX)

Enter Binance Decentralize Exchange (DEX). This is Chanpeng Zhao’s trump card to corner the crypto exchange market. With Binance DEX, users can trade directly from their wallet or hardware device. The transaction is powered by the Binance blockchain and it happens between two users instantaneously and without an intermediary.

Here’s a quick video on how Binance DEX looks like:

In other words, you are in total control of your funds. You don’t even have to create an account in an exchange to trade. Also, after the trade, there’s no need to withdraw your funds because the coins go straight to your wallet. Even stock exchanges that have existed for hundreds of years do not offer these benefits.

The ability of users to secure and control funds by using Binance DEX make BNB a very strong long-term play. With a virtually unhackable platform, traders and investors from other spot trading exchanges are very likely to switch to Binance DEX. In addition, the platform is also likely to attract no-coiners who have been deterred to invest in crypto due to safety concerns or poor user experience.

The influx of users in Binance DEX will drive demand for Binance Coin. That’s because BNB will be used as gas. This means that people who want to trade using Binance DEX will have to secure some amount of BNB to pay for transaction fees.

Changpeng Zhao announcing BNB will serve as gas for Binance DEX

This is how Changpeng Zhao plans to corner the crypto exchange market. Unless other spot trading exchanges can innovate faster and better, BNB is very likely to remain long-term bullish.  

Bottom Line

Binance Coin did not make it to the top 10 largest cryptocurrency by market capitalization by accident. Changpeng Zhao created an ecosystem where he leveraged his powerful exchange to instigate demand. He then introduced scarcity to keep the price of BNB stable until Binance DEX becomes available to the public. At that point, demand for BNB will likely be insatiable.

Create demand, reduce supply, and corner the market. This is our long-term bullish case for Binance Coin.  


Disclaimer: The writer owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.