BIT Blog

Analysts' Insights

Analysts' Insights

Bitcoin Sacrificed to Shield Binance’s BNB Token

1) True, Binance FUDs (fear, uncertainty, doubt) have so far come and gone but have still left a mark on the exchange. Their market dominance is lower as the CFTC, SEC and DOJ have circled for months, and the outspoken CEO has become less active on social media.

2) BNB, the native Binance exchange token, had a market capitalisation of $110bn in November 2021. Unarguably, this was one of the fastest value creations ever achieved. Back in September 2017, the market capitalisation was just $10m.

3) Many Binance employees were paid in BNB tokens, instead of fiat, and corporate morale is closely correlated to the price performance of those tokens. At least a thousand employees have been laid off and likely, they would sell their BNB tokens upon departure.

4) While there are various stories about a potential $130m BNB loan liquidation near the $210-ish price. Technically, the BNB token (BNB) looks very fragile. To us, $130m is peanuts but the BNB market cap is still at nearly $33bn and the $200 token level is just psychologically important.

5) In February 2021, the BNB token ramped from $40 to $130 in less than three weeks, and a week later, the price was suddenly at $330. This astronomical rise without a bit of back and forth that would cement the chart-technical support has left the BNB token very vulnerable as traders that are using charts to make decisions would argue that once the $200 level goes, there is hardly any support back to $130 – if not even lower.

6) The $200 level was only tested once after the Three Arrows Capital cascading liquidation (incl. Celsius, BlockFi, Voyager, Babel, etc.). One data point is not robust, the chart guys would argue.

7) The BNB funding rate has started to widen again to a steep discount and appears to accelerate. Shorts are paying -60% annualised yields to longs to keep those shorts. This year, we had three occasions when shorts increased to more than -140%. Hence, there is more firepower from those aggressive traders to push the funding rate even lower.

8) But this is the first time this year that the BNB token is close to the (psychological and) chart-technical $200 level. Hourly data shows that Bitcoins are being sacrificed to support the BNB token. While, both coins are often highly correlated (Aug 8 to Aug 16). Towards the end of last week’s sell-off, the BNB token managed to (mysteriously) move sideways.

9) Similarly, overnight we saw that Bitcoin (BTC) dropped a few percent again while the BNB token managed to rally. This is more than a coincidence. Bitcoins are likely dumped to support the BNB token - but for how long?

10) This is a considerable risk for the crypto markets and we also want to reiterate that we are bullish on Bitcoin – pick your poison and make an informed trading decision.

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