A lot has been going on at Binance in the last two weeks.
The exchange pleaded guilty to multiple federal charges, including anti-money laundering, unlicensed money transmission, and sanctions violations; consequently reaching a settlement deal with the Department of the Treasury and the U.S. Commodity Futures Trading Commission (CFTC) to pay the largest-ever fine by a crypto firm in U.S. history—a substantial $4 billion.
Binance’s settlement has essentially given credibility to regulators’ claim that its ascent to the position of the world’s largest cryptocurrency exchange is partially attributable to its involvement in illicit activities.
Changpeng Zhao (CZ), Binance’s co-founder and CEO, also resigned, a decision which might have been influenced mainly by his role in the entire debacle and the charges levelled against him.
Meanwhile, Richard Teng, the executive to whom Zhao passed the torch, has revealed his plans to steer the exchange to its next chapter of greatness by making it regulatory compliant. And we have started to see signs.
Before this incident, Binance had been in regulatory hot waters in many countries. This led to the exchange having to cease operations in some of these regions and scale back on some of its services. For instance, it announced in August 2023 that it would sunset its BUSD stablecoin by the end of December 2023.
However, there is a looming question: what would be the fate of the BNB, the Binance exchange’s native token, amidst all of this?
BNB holds a central position in Binance’s extensive empire, comparable to a stock-like asset whose value is closely linked to the success of Binance’s trading platform and overall ecosystem.
Since its initial coin offering in 2017, BNB has witnessed remarkable growth parallel to the trading volume on Binance.com. In 2021, it surged approximately 1,300%, reaching a peak of around $675 per coin and a market value of about $110 billion.
With a current market value of $37 billion, BNB stands as the most successful exchange token. Crypto exchanges often issue their own tokens to raise funds and enable founders and early investors to benefit from their stakes in the project. Binance incentivizes the use of the token by offering discounts to customers who transact with BNB.
According to data from researcher Nansen, BNB tokens constitute about 5.2% of the more than $55 billion in customer assets at Binance. Additionally, it serves as the currency of BNB Chain, a blockchain initiated by Binance, and is used, in part, for employee salaries and bonuses.
Analysis of BNB’s Current Market Action
BNB is currently ranging in the $224 – $$237 zone under the 200 MA (white line). While major alts and L1s have witnessed massive pumps in the last few weeks as they trailed Bitcoin, BNB has lagged as investors seem sceptical about its immediate future.
A break above the 200 MA (white line) must receive a confirmation (price bouncing on the MA to retest, not breaking down below it). This confirmation will mean a bullish move to traders; right now, the last break above the 200 MA (white line) only resulted in a drop below with a single candle towards the end of November.
BNB has also not mimicked Bitcoin’s bullish run of the past few days. The token seemed to be going the route of XRP when the U.S. Securities Exchange Commission (SEC) came knocking and accused it of being an unregistered security. Interestingly, Binance has a pending case with the same US regulator. The case is expected to go to court in 2024 and might just determine what the long-term pricing of BNB would look like, just like XRP.
Time will unveil if BNB can shake off this impasse between the bears and bulls and get bullish like other layer one tokens. A significant plus for BNB will be its utility as the native token of the Binance Smart Chain(BSC) ecosystem.
What’s Next for BNB?
Since the U.S. Securities and Exchange Commission (SEC) ‘s lawsuit against Binance, the exchange token, already on a decline from its all-time high, has further depreciated. BNB experienced a significant loss of $10 billion in market value after the announcement of the lawsuit in June.
The SEC filed 13 charges against Binance, and many of these charges are still awaiting resolution. Notably, these charges are broader in scope than those collectively brought by the DOJ, CFTC, and Treasury. The SEC alleged, among other things, that BNB coin constituted an unregistered security.
Current market trends indicate a downward pressure, particularly following the recent developments with the U.S. CFTC and Treasury. The outlook appears pessimistic, with expectations of the price potentially falling to the $202 region before a potential rebound or retest.
While the lawsuit against Binance and BNB holds implications for the token’s long-term future, in the short term, the negative news stories have not fostered increased buy pressure for BNB. Many investors remain sceptical about how BNB will navigate scrutiny from the SEC. A collapse of BNB could have detrimental consequences for the entire BNB chain ecosystem, given the token’s pivotal role in facilitating essential ecosystem functions.
Final Thoughts
BNB is a token with robust fundamentals; aside from being an exchange token, it is the native token for the BNB blockchain, meaning users need it to interact on the BNB chain. And with the perceived ease of use and constant meme craze on the BNB chain, it’s hard to see that utility drying up anytime soon. But with Binance vulnerable to the U.S. authorities and trying to negotiate their way out of trouble, nothing is certain right now.
Binance and BNB will face an uphill battle on multiple fronts to prove BNB isn’t a security and to keep up prices on the chart. The historical precedent set by cases like Ripple and XRP, where legal scrutiny resulted in significant market value losses, adds a layer of caution to the current situation. In essence, the future trajectory for BNB is still very much uncertain, regardless of the market conditions presently.
Disclaimer: This piece is intended solely for informational purposes and should not be considered trading or investment advice. Nothing herein should be construed as financial, legal, or tax advice. Trading or investing in cryptocurrencies carries a considerable risk of financial loss. Always conduct due diligence.
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