BNB’s Bullish Breakout: Uncovering the Reasons for Binance Coin’s Rise

BNB Surges Above $500 but Faces Weekly Decline

On August 8, BNB (BNB), the native token of BNB Chain, surged by 6%, breaking above the significant $500 resistance level. Despite this strong performance, BNB remains down 9% on a weekly basis due to a major correction earlier in the month. This decline was largely driven by a reduced investor appetite for cryptocurrencies.

However, BNB has outperformed most altcoins. Over the past 30 days, BNB is down only 1%, while the overall altcoin market capitalization (excluding stablecoins) fell by 7% during the same period.

Improved Macroeconomic Outlook Fuels BNB’s Price Rise

Traders are now speculating whether BNB can reclaim its late-July high of $590, especially as changing sentiment impacts the network’s health. According to Yahoo Finance, analysts believe that investor sentiment improved following better-than-expected US jobs data. This optimism was reflected in the S&P 500 index, which gained 1.9% on August 8, and crude oil, which rose by 1.1%. Traders have become more risk-averse yet confident in potential interest rate declines throughout 2024.

The US 5-year Treasury yield, which hit a low of 3.46% on August 5, surged to 3.85% on August 8. This movement typically reflects distrust in the Federal Reserve’s ability to control inflation without triggering a recession. If the central bank is forced to cut interest rates and buy back bonds due to a weaker economy, this could create upward inflationary pressure while reducing capital costs, potentially boosting corporate earnings.

A significant part of BNB’s appeal comes from its benefits on the Binance exchange, including:

• Discounted trading fees
• Access to exclusive launchpad offers

Data from DefiLlama shows $2.8 billion inflows between August 5 and August 7, reinforcing BNB’s leadership in deposits and enhancing trader sentiment, especially considering Binance’s former CEO and co-founder, Changpeng “CZ” Zhao, remains in jail.

Assessing BNB’s Derivatives Market Confidence

To determine if traders are more confident in BNB after it reclaimed the $500 support, it’s essential to examine its derivatives metrics, particularly the leverage demand between longs (buyers) and shorts (sellers). Exchanges typically settle perpetual contracts every 8 hours, charging a fee from the side demanding more leverage. When traders are confident, longs pay 1.2% per month or even higher, whereas a negative funding rate indicates a bearish market.

Recent data shows BNB’s funding rate has been negligible over the past few days after a brief period in the red. While the absence of excessive leverage is positive, as it leaves room for bulls to increase their positions when necessary, the lack of enthusiasm after BNB’s 23% price gain in three days is somewhat concerning.

BNB Chain’s Activity Surges, But Network Deposits Lag Behind Competitors

Beyond the derivatives markets, it’s crucial to assess how BNB Chain stacks up against the competition regarding deposits and activity. Onchain metrics provide insight into whether real use cases support BNB’s valuation and the network’s appeal for new entrants and project launches.

BNB Chain’s total value locked (TVL) reached BNB 8.8 million on August 7, a 9% increase from two weeks prior. In comparison:

• Solana’s TVL grew by 21% in the same period in SOL terms
• Ethereum deposits increased by 14% in ETH terms
• Avalanche experienced a 29% TVL growth in two weeks when measured in AVAX terms

Despite this nominal increase, BNB Chain’s decentralized application deposits lagged behind its competitors.

However, the latest data from DappRadar indicates that BNB Chain’s decentralized application volumes surged over the past 7 days, surpassing Ethereum’s 45% gains and Polygon’s 84% growth. In terms of active addresses (UAW) engaging with the networks’ Dapps, BNB Chain stood at 1.06 million over 7 days, while Ethereum saw a 1% decline and Solana had 29% fewer users.

Conclusion: BNB’s Future Outlook

Overall, the lack of demand for BNB futures leverage long and slower TVL growth relative to competitors cast doubt on the possibility of a bull run toward $590. However, its solid onchain activity justifies recent price gains, suggesting there is no reason for BNB to weaken below $500.

Disclaimer: This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.