06.12.2021

Binance Coin BNB jumped above $ 600 for the first time. What is the reason?

Binance’s native token, Binance Coin, has delivered impressive returns over the past few weeks. Due to the growth in the value of the token, its capitalization today is above the level of $ 85 billion.

At the same time, the capitalization of BNB’s closest competitor, Ethereum, is $ 250 billion. That is, now BNB has reached 34 percent of the ETH capitalization and is not going to stop preliminarily. Let’s talk about the reasons for the sharp growth of cryptocurrency in more detail.

Recall that cryptocurrency fans are already well aware of the profitability of projects related to Binance in general. In particular, yesterday we got acquainted with the most profitable coins for the first quarter of 2021. They are representatives of the decentralized finance industry Cake and Luna. Moreover, both projects are based on Binance Smart Chain, not Ethereum.

We checked the actual data: the BNB rate record was set yesterday. The peak cryptocurrency rate was $ 638. It is important to note here that in early January of this year, Binance Coin was trading at $ 37, that is, the rate increased more than 17 times in less than four months.

Which cryptocurrency brought the most profit

As analysts note, Binance Coin is growing for three key reasons: the overall rise in popularity of Binance Smart Chain, strong market momentum, and the gap between BSC and Ethereum projects in capitalization. In recent weeks, the volume of transactions on the Binance Smart Chain has exceeded that of the Ethereum blockchain by almost three times. Hence, we can conclude that now projects in the Binance ecosystem are experiencing explosive growth, which is very positively reflected in the native token of the exchange.

Recall that the payment for interaction with the BSC network by the type of transactions or swaps is paid in BNB. A similar situation is observed in the Ethereum network, where you need to pay for gas in ETH for the transfer. This creates a demand for Binance Coin and forces users to buy cryptocurrency, which affects the value of the blockchain asset.

Back in March, there was a huge gap between ETH and Binance Coin in market capitalization – that is, the product of the value of tokens by their number – as well as in the total cost of projects based on these two coins. While the price of ETH has remained relatively stable over the past two weeks, the value of BNB has managed to increase several times. The situation was clarified by a cryptocurrency analyst under the pseudonym Wu Blockchain.

BNB surpassed the $ 600 level, but Ethereum network fees fell to their lowest level in a month. Although BSC’s transaction volume is three times the corresponding figure for Ethereum, they are not in a competitive relationship. The 10 largest BNB addresses own more than 88 percent of the coins, and in the case of Ethereum, this figure hovers around 20 percent. The future of Ethereum depends on the EIP-1559 update and the second version of the protocol. The only two things Binance should be concerned about are possible government crackdown and hacker attacks.

That is, the expert also hints at the excessive centralization of the Binance network. Representatives of Messari expressed a similar point of view yesterday – their point of view is described here.

Kelvin Koch, Managing Partner of Spartan Group, also believes that there is no need to expect a return flow of capital to Ethereum any time soon. Here is his line, quoted by Cointelegraph.

BSC has its own DeFi summer. There are many more interesting projects here. If you’re wondering why Ethereum-based projects from the decentralized finance niche are showing such low returns, take a look at the gap between the value of the BSC and ETH ecosystems. Until this gap narrows, money will not flow back to Ethereum.

Note that Ethereum lovers disagree with this prediction. The fact is that tomorrow the ETH network is waiting for a global update, which will improve the situation with fees in the blockchain. And this is good news that can positively affect the value of the asset.

In addition, analysts see Binance Smart Chain as a centralized system. It is this feature that allows it to show much more impressive results in terms of commissions and speed than Ethereum. Well, centralization can also become a problem for the BSC image – yet this property does not correspond to the key features of the cryptocurrency industry.

We believe that the growth of BNB in ​​the current environment looks more than logical. Still, the cryptocurrency is the native token of the Binance exchange and the Binance Smart Chain blockchain, which are now in incredible demand. This means that users are actively buying BNB, which raises the coin rate even higher.

Therefore, now investors should take a closer look not only at BNB, but also tokens of other exchanges. Perhaps the popularity of the market and the growth of trading volumes of crypto traders will have a positive effect on them in the near future.

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