Over the past 30 days, the Binance Coin [BNB] network value has had impressive gains beating exceeding in performance every other coin in the market while the overall market cap fell in the same time frame. The BNB market cap rose from $764 million back on January 11th, to $1.378 billion on February 11th. Gains of 80% in a month. In addition, BNB landed a spot in the coveted top ten ranking for most valuable cryptocurrencies.
As if that is not enough, the coin has gone on to register all-time highs in terms of Bitcoin-denominated values. The coin was trading against the Bitcoin [BTC] at highs of 0.002688 at 10:00 UTC on Monday, February 11th, 2019. These are all impressive gains and one could be forgiven for assuming that the reason behind this is because the token is associated with Binance, the leading cryptocurrency exchange by trade volume. This is partly true of course but below are some of the reasons why BNB has been rising while the general market has been falling.
If you are familiar with cryptocurrency economics then you’d understand the principle of ‘burning’ tokens. Basically, the term is figurative in the sense that the burnt tokens are removed from circulation. According to the Binance whitepaper, 20% of annual profits will be set aside to purchase back BNB tokens from circulation and destroy them every quarter. This translates to 5% profits used to purchase BNB back for burning each quarter. The net effect of this exercise is reducing the token supply. From an economic standpoint, a reduction in supply increases the price of a good and in this case that is what happened.
Initially, BNB was issued to investors to finance the launch of the exchange. But once the exchange started making profits, these are instead used to buy back tokens in supply. The goal of this exercise is to reduce coins in circulation by 50%. Therefore, on January 14th, 2019 Binance purchased back 1,623,818 tokens worth about $9.4 million at the time which were consequently burned from circulation.
January also saw the relaunch of the Binance Launchpad, a platform for incubating and launching blockchain projects. The platform basically launches the projects through the ICO crowdfunding model and the model of purchasing tokens is through using BNB tokens.
So far the platform successfully launched the highly anticipated BitTorrent tokens in collaboration with Tron. Investors in the BTT tokens were required to use BNB and Tron tokens (TRX) to purchase BTT tokens. This increased the demand for Binance Coin as well as TRX. Later this month, the Binance Launchpad has scheduled another ICO for the Fetch project but this time, investors will only be required to hold BNB to purchase Fetch tokens.
Over the past few months, Binance has been developing its own chain to become independent from Ethereum, a platform on which its native token BNB is based. This new blockchain will enable Binance to launch its decentralized exchange (DEX). In December, the Binance CEO CZ released a sneak peek preview into the DEX platform and according to recent updates from the team, the DEX platform is about to be launched.
CZ has announced the launch of the Binance Chain testnet for this month February 20th. A highly anticipated platform considering that Binance is the leading crypto exchange. The launch of new features has traditionally helped propel the price of the shares of a company and this case is not any different. Speculative investors are anticipating new and greater things ahead for Binance and are therefore purchasing Binance coins now.