BNB is a token that significantly distinguishes itself from other major cryptocurrencies both in its origin as well as in its functionality. An incredible strong price performance in 2019 so far has brought the token into the spotlight of many investors. In the following we will analyze where BNB derives its value from and what the potential future value proposition of the token looks like.
Fundamental price analysis
BNB initially originated as an ERC-20 token on the Ethereum blockchain at a time when Binance was still exclusively designed as a centralized cryptocurrency exchange. The token burn functionality based on a share of the fees accrued by the platform was already at that point in time integrated into the BNB token economics. With the launch of the Binance Chain in spring 2019 BNB eventually migrated from Ethereum to its native Binance Chain and the token economics of the BNB token gradually expanded.
The Binance Launchpad is one of the direct drivers of the BNB price. The amount of BNB tokens that a user holds decide on the user’s chances to participate in a Launchpad sale. Users who wish to participate in a launch sale need to hold a minimum amount of 100 BNB. The higher their BNB balance is, the more lottery tickets they receive which eventually may lead to rights in the participation of a launch sale. This system is designed to provide an incentive for investors to hold BNB tokens and is one of the various drivers of the price of BNB.
Binance is selecting projects to participate in its Launchpad very carefully. The projects that went through the Launchpad have seen extremely strong price performance.
— CZ Binance (@cz_binance) May 19, 2019
Changpeng Zhao, the CEO of Binance, is himself strongly promoting the Binance Launchpad on Twitter. Overall he is very vocal about the various entities which compose the Binance ecosystem such as the Binance Exchange, the Binance Lab and the Binance DEX.
An additional pillar of BNB’s value is the token burn functionality which was already implemented in the original BNB ERC-20 token. In order to benefit BNB holders from the profit of the exchange Binance burns the equivalent of 20% of its quarterly profit in BNB. This periodic token burn of BNB reduces the supply of the token and makes it hence more valuable. It directly links the financial profitability of the company with the token valuation.
The third pillar and use case of the BNB token is the payment of fees on the platform. Users that hold BNB on Binance by default pay their trading fees in BNB and receive a 25% discount in fees compared to other users. The discount in fees is also valid for trades performed on Binance DEX. This is a further incentives for traders to keep balances in BNB.
To sum up, the Launchpad privileges, the token burn and the discount in trading fees are the three main drivers of BNB’s value and align the token economics with the financial interest of the Binance platform.
Historic price analysis
BNB was the first major cryptocurrency that was able to reach it’s all time high again since the 2018 bear market. It surpassed its previous January 2018 all time high in April 2019. Furthermore, the cryptocurrency corrected much less during the bear market compared with many of its peers. In May 2019 BNB showed an extremely strong price action.
At the current stage of the market no price prediction is possible without referring to the price of Bitcoin. Bitcoin is still very much driving the cryptocurrency market at the early stage of this nascent industry. Despite the fact that BNB has been significantly outperforming BTC in 2019 its future price development will be closely aligned with the performance of Bitcoin.
The overall market sentiment has shifted from bear to bull in the course of 2019 as the market consolidated around higher highs and higher lows. Most industry observers expect that Bitcoin will further increase throughout 2019. A continuous upwards trend of BTC is one of the requirements for a positive price performance of BNB.
The hype and recent progress around BNB make it possible that BNB will continue to outperform BTC and the overall cryptocurrency market as the market turns even more bullish.
BNB price prediction by end of 2019
The worst case scenario for the price of BNB has already happened. Binance confirmed a hack with a loss of 7,000 BTC in early May 2019. However, the value of BNB only suffered in the short term from the hack and recovered briefly thereafter. As cryptocurrency exchanges become more aware of the risk of hacks a lot of their funds are stored in cold storage which reduces the risks associates with hacks. They no longer present existential threats, especially for larger exchanges. The price of BNB further increased as Binance announced that it introduces new features such as margin trading.
Based on the extremely good start in 2019 and the robust performance through the hack of the platform it is entirely possible that BNB will finish 2019 among the top five most valued cryptocurrencies by market capitalization with a price above 90 USD. This would represent an increase of almost 3x compared to the price of writing and would value BNB around 13 billion USD.
BNB price prediction by end of 2020
The year 2020 will be marked by the Bitcoin halving that will take place in May 2020 and has historically caused a significant bull market for the overall cryptocurrency market. While historic data is no predictor for the future there is a certain likelihood that the prices of cryptocurrencies will follow past patterns. If BNB reaches our price target for 2019 which is 90 USD and manages to outperform the overall market in 2020 a new all time high of 500 USD per BNB seems possible. A price of 500 USD would mean a market cap of more than 70 billion USD. While this would be a tremendous market capitalization for an emergent cryptocurrency it would still be a reasonable market cap compared to the market capitalization of the gate keepers of our current fiat system. JP Morgan Chase which is the largest bank by market cap is currently valued at more than 350 billion USD. At the same time we need to note that the banking industry is much more fragmented and much less globalized than the cryptocurrency markets where the big bulk of the volume is concentrated among few large exchanges that operate on a global basis. If BNB would achieve this price target of 500 USD it is very likely that it would become the third most valuable cryptocurrency only behind Bitcoin and Ethereum.
BNB is one of the most promising cryptocurrency projects in 2019 and 2020. Market observers will watch the progress of Binance DEX and the Binance Launchpad closely. If Binance can position itself as the leading ICO platform this would be a large value driver for BNB. As long as the team around Changpeng Zhao continues to ship reliably our optimistic price target of 500 USD is entirely possible.