#BNB BNB, the native cryptocurrency of Binance, the world's largest cryptocurrency exchange, has recently started a strong rally, successfully breaking away from the previous bear market trough, and has achieved an amazing increase of more than 60% in the past two months alone. What are the key factors that have contributed to the rise in BNB's price? What are the catalysts driving BNB's bullishness? This article will deeply analyze and explore the future development trend of BNB.

BNB token attributes and uses

BNB was issued through an ICO (initial coin offering) in 2017 and listed on the Binance exchange 11 days later. The token was traded at around $0.1 in the early days of listing and reached nearly $700 at the peak of the bull market in 2021. BNB is mainly used in Binance's platform services and the BNB Chain ecosystem:

In terms of Binance platform services:

Transaction fee deduction: holders can activate the BNB discount function on the platform to obtain transaction fee discounts.

Use in Binance NFT platform, financial products or financial businesses.

Used for payments and donations, such as spending the token at online or physical merchants and platforms that support BNB.

Participate in Binance Launchpad token sales and Launchpool new coin mining.

In terms of the use of BNB chain:

As the gas token for BNB Smart Chain (BSC), Layer 2 solutions opBNB and zkBNB, transaction fees for these blockchains and the hundreds of applications running on them are denominated in BNB.

Participate in the governance of the BNB Beacon Chain.

Used in a variety of on-chain applications, such as pledging or lending BNB on the BNB Smart Chain Ecological Lending Protocol.

Periodically destroy part of the token supply

BNB will permanently remove a certain amount of BNB from circulation through its Auto-Burn system and instant destruction mechanism, thereby reducing the total supply of tokens and producing a deflationary effect.

In the quarterly "automatic destruction" of BNB, the amount destroyed will be adjusted according to its price and the number of blocks generated on the BNB Smart Chain in that quarter. The most recent BNB automatic destruction was carried out on January 17, 2024, with a total destruction of approximately 2.14 million BNB.

Another instant destruction mechanism based on fuel (gas) fees will destroy a fixed proportion of gas fees in each block, and this proportion is determined by the BSC validator. According to the data from the BNB Chain browser, the initial total amount of BNB tokens was 200 million, and the current circulating supply is about 149 million (that is, nearly 25% of BNB has been destroyed). Since the goal of the BNB destruction mechanism is to gradually reduce the total supply to 100 million (50% of the total supply), this means that there is still room for BNB supply to fall further, which will help the rise in BNB prices to a certain extent.

BNB circulating supply chart, source: BNBBurn.info What factors are driving the recent rise in BNB?

Although Binance officials clearly stated in their BNB introduction article that BNB holders "have no ownership rights to Binance's profits, and investing in BNB does not mean that they are investing in Binance." However, in practice, since the market changes in the cryptocurrency market are still mainly driven by narratives, Binance's platform dynamics often affect the market's view of BNB prices, resulting in fluctuations. So, what factors are driving BNB's recent price increases?

Launchpool projects are launched one after another

In addition to the market sentiment brought by the Bitcoin ETF, the launch of the Binance Launchpool project is the main driving factor for the recent rise in BNB. Binance Launchpool is its new coin mining platform, which allows blockchain projects to gain a lot of exposure opportunities and helps Binance users understand various emerging blockchain trends.

Binance Launchpool works by allowing users to invest their BNB or specific stablecoins into the Launchpool mining pool to obtain token rewards for the current project, which allows BNB holders to obtain additional income from each Launchpool. Data shows that the average annualized rate of return of the last five new coin mining projects reached 125% (only calculating the BNB mining pool income), bringing a strong wealth effect to BNB holders.

Launchpool project yield data for the past 5 periods

BNB’s price trend shows that each Binance Launchpool launch can lead to a short-term rise in BNB prices, especially when the entire market is in an upward trend or the current Launchpool project receives widespread attention, BNB tends to continue its upward trend.

The release time of the last six Launchpool projects and the changes in BNB price trends Settlement with the US Department of Justice

On November 22, Taiwan time, the U.S. Department of Justice announced that it had reached a settlement with Binance. Binance also appointed Richard Teng, who has a senior traditional financial and supervision background, as its new CEO. Although the price of BNB fell by nearly 14% at the time of the settlement announcement, the incident seemed to provide an opportunity for the price of BNB to bottom out and rebound. In the past two months, the price of BNB achieved a significant increase of 60%.

In its resolution with Binance, the US regulator did not accuse the exchange of misappropriating user funds or engaging in any market manipulation, which eliminated users' concerns about Binance and strengthened the confidence of BNB holders. Data shows that after a short period of large outflows, Binance's user funds have gradually flowed back to the platform, with a net inflow of nearly US$5 billion, far exceeding other exchanges.

On the other hand, according to data released by Kaiko in January, after reaching a settlement with the Department of Justice, Binance's market share relative to the other 23 centralized exchanges has hardly dropped. The hype of ETFs in January led to a surge in global trading volume, helping Binance's market share recover to nearly 50%. As Binance continues to expand its advantages in global compliance, it is expected that Binance will still maintain its industry leadership as one of the key indicators of market development.

Binance’s trading volume market share change from 2023 to January 2024 (Source: Kaiko) Technical breakthrough

From the perspective of technical analysis, BNB formed a bullish head and shoulders bottom pattern after falling to the bottom from June to December last year, and began to increase in volume from October. Subsequently, BNB continued to increase in volume in late December and stabilized at $263, eventually reaching the key pressure level of $340, reaching the stage increase.

After a one-month short-term correction, BNB broke through the pressure level of a potential long-term double bottom pattern in mid-February and may be starting a new wave of gains. Whether it can continue remains to be seen.

BNB Potential Bullish Catalysts

Volume growth in bull markets

Although the cryptocurrency market has experienced an amazing rally since the beginning of 2023, Bitcoin prices have not yet hit a new all-time high. Judging from the previous two bull market trends, Bitcoin tends to break through the previous high about 7 months after the halving, and then a new wave of increases will occur, which will drive the overall market to usher in a stronger increase.

Bitcoin price history (Source: TradingView, the orange lines represent the weeks of the first three Bitcoin halvings)

With the Bitcoin halving expected to arrive in April this year, the potential price increase may push market sentiment to a climax and promote the growth of Binance trading volume. Given that Binance has a huge user base of more than 177 million users worldwide, the number of users using BNB to obtain transaction fee discounts may increase, driving the demand for BNB purchases, thereby further pushing up the price of BNB.

More Launchpad and Launchpool projects released

As the cryptocurrency market enters a bull cycle, more and more developers are entering the field. After the accumulation and development during the bear market, many crypto projects are beginning to emerge rapidly. In addition, as institutional funds flow back into the crypto field, the growth rate of the entire industry is expected to accelerate further.

In such a market environment, the number of emerging projects seeking exposure and financial support through Binance Launchpool or its token issuance platform Launchpad will increase significantly, which will also encourage more users to buy and hold BNB.

New market layout and growth

In recent years, Binance has continued to expand its business to new markets and is committed to meeting local compliance requirements. For example, Binance entered the Japanese market in 2022 through the acquisition of the SEBC platform, and officially launched Binance Japan in August last year. BNB also entered the Japanese market for the first time. So far, Binance Japan is the platform that provides the most trading pairs in the local market. Binance's compliance advantages in the global market further create its growth potential. The growth of users in these regions can increase the usage and demand of BNB.

Web3 wallet accelerates the development of BNB chain ecosystem

Binance launched the Web3 wallet last year, which greatly lowered the threshold for users to enter the decentralized world. It improves the on-chain operation process by providing an intuitive and easy-to-use interface. With the further integration of the Binance Web3 wallet and the Binance platform, users will explore and use the BNB chain more frequently, which will not only bring new active users to the applications on the BNB chain, but also stimulate the growth of demand for BNB itself.

Introducing the One BNB concept: BNB Chain’s multi-chain strategy and vision for mass adoption

In its recently released 2024 Outlook, BNB Chain stated that it will be committed to promoting a multi-chain architecture called the "One BNB" concept, creating a unified solution through the seamless integration of BNB Smart Chain, high-performance L2 network opBNB and storage chain Greenfield to meet distributed computing and storage needs, and continuously improve performance, speed, security and cost, making BNB Chain the first choice for blockchain developers.

The core goal of this vision is expected to lay the foundation for a significant expansion of the BNB Chian ecosystem, thereby increasing the value of BNB and its application scenarios. Specific strategies include:

Focus on specific dApps to achieve mass adoption: including high-frequency DeFi, artificial intelligence (AI), full-chain games, decentralized physical infrastructure network (DePIN), decentralized society (DeSoc), as well as high-performance infrastructure such as browsers, data indexing and account abstraction (AA). These are areas that have attracted much attention in this bull market. If related dApps develop, they should be able to attract funds to flow into the BNB Chian ecosystem.

From single opBNB to opBNB Connect: In the future, opBNB, BNB Chain’s high-performance Layer 2 network, will develop “opBNB Connect”, allowing dApps with a potentially large user base to build their own L2 to develop their own ecosystem. All L2s on opBNB Connect can be seamlessly connected, including cross-chain assets and components between different protocols.

Improve the scalability of opBNB: Increase the gas limit from 100 million to 200 million to achieve the goal of 10,000 TPS, and design a data availability layer on BSC based on EIP4844 and Greenfield to reduce transaction costs to 5 to 10 times lower than current levels.

Maintaining the highest performance EVM state and implementing parallel EVM 3.0: In 2023, BSC's block gas limit increased to 1.4 million, the largest of all EVM-compatible chains, and its transaction volume once reached 32 million per day and 2,000 TPS. In addition, opBNB has become one of the most active L2s. In 2024, the development focus of BNB Chian will shift to state and storage optimization, and optimized PBSS (path-based storage solution) and parallel EVM 3.0 will also be gradually implemented between full nodes and validators.

On the other hand, the core development team is introducing a measure called "Beacon Chain Fusion", which plans to retire the BNB beacon chain and migrate its functions to BSC, which will simplify the complexity of BNB Chain and accelerate the decentralization of the network and governance. It also means that more BNB holders may participate in the development of BNB Chain.

Can BNB outperform Bitcoin in the future?

Bitcoin has risen by more than 200% since the beginning of 2023, while ETH and BNB have risen by about 147% and 54%, respectively. However, since December last year, BNB has outperformed the two largest currencies by market value. Can BNB continue this good performance after Bitcoin halving?

According to the development of the past two cycles, Bitcoin tends to lead the market in the early stage of the bull market. In the middle and late stages, market funds will gradually rotate from Bitcoin to various altcoins, and Bitcoin's market share will continue to decline. If this round of bull market continues this trend, BNB is expected to see a greater increase.

Changes in Bitcoin Leading Index (Source: TradingView, the orange lines represent the weeks of the first two Bitcoin halvings)

Although Binance is the world's largest cryptocurrency exchange, BNB holders should still pay close attention to the platform's operating conditions, market dynamics, and regulatory challenges, such as being alert to any abnormal on-chain fund movements. At the same time, the breakthrough of BNB chain technology and the continued growth of its on-chain ecology are also key factors, which are not only the cornerstone of BNB price, but also an important indicator for evaluating its investment potential.

This article has risen by more than 60% in two months. Can Binance Coin BNB lead this round of bull market? It first appeared in Zombit.