BNB Chain DEX Volumes Fall 24% — Is BNB at Risk?

BNB Price Decline and Recovery

BNB, the native token of BNB Chain, has experienced a significant decline of 16.1% from August 23 to September 2. The price fell from a high of $598.80 to a low of $502.10. Despite this drop, buying activity below $510 has helped BNB recover some losses, with the current trading price at $517.

Investors are worried that BNB may be entering a bearish market, especially as the token has struggled to maintain levels above $610 since mid-June.

Declining Activity on BNB Chain

Metrics from BNB Chain indicate a decline in interest, particularly in decentralized exchange (DEX) volumes. This decline has led traders to speculate about a potential retest of the $400 level seen on August 5.

Impact of Changpeng “CZ” Zhao’s Detention

Some market participants believe that BNB’s performance could improve following the release of Changpeng “CZ” Zhao, BNB Chain’s co-founder and former CEO, from detention in the United States. Although there is no direct link between CZ and BNB’s price, the anticipation surrounding his release might influence market sentiment.

Anonymous altcoin trader Degen.eth has suggested that a price surge could occur if CZ is freed after pleading guilty to money laundering charges. However, traders might front-run this event by buying BNB before CZ’s release and selling as the date approaches. This strategy carries risks, particularly given the recent decline in BNB Chain activity.

BNB Chain’s Market Position

Despite recent underperformance, BNB remains the third-largest cryptocurrency by market capitalization, currently valued at $75.7 billion. This is a 23% premium over Solana’s (SOL) market cap of $61.5 billion.

Interestingly, the Solana network holds more deposits in its smart contracts compared to BNB Chain. BNB Chain’s total value locked (TVL) recently fell to its lowest level since February 2021. This suggests that investors are exploring better opportunities elsewhere, even as total cryptocurrency TVL has grown by 27% year-to-date in 2024.

Recent TVL Trends

• BNB Chain: Deposits in BNB Chain’s smart contracts decreased by 14% over the past three months, falling to 7.5 million BNB as of August 20.
• PancakeSwap: The leading DEX on BNB Chain saw its TVL drop by 15% to 2.93 million BNB.
• PinkSale: The decentralized launchpad experienced a 26% decline in TVL.
• Ethereum and Solana: In contrast, the Ethereum network’s TVL increased by 7% in Ether (ETH) terms, while Solana’s TVL rose by 28% in SOL terms between May 20 and August 20.

Decline in DEX Activity and User Engagement

Data from DefiLlama shows that BNB Chain’s DEX volumes declined by 24% over the week leading up to September 2, underperforming compared to Ethereum’s 4% drop. Additionally, DappRadar reports an 18% decrease in the number of active addresses interacting with BNB Chain smart contracts, while Ethereum saw a 5% decline.

Most concerning is the sharp decline in active users for BNB Chain’s top five DApps, including Move Stake, Treasure Ship Game, PancakeSwap, StarryNift, and Galxe. This downturn spans across various applications, from games and staking services to DEXs and Web3 platforms.

Conclusion

The recent decline in BNB’s price and activity on the BNB Chain appears to be linked. Although there remains potential for a price rebound, particularly with the anticipated release of CZ, the current market conditions and declining metrics suggest caution. Investors should weigh these factors carefully when considering their positions in BNB.