How Could Binance Coin’s Burn of $390 Million Affect The BNB prices?

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Binance Coin is the native cryptocurrency of Binance, the world’s biggest crypto exchange. This coin is denoted by the sign “BNB.” This crypto was originally based on the Ethereum blockchain but eventually migrated to its own blockchain, dubbed the “Binance chain.” Binance currency is limited to a total supply of 200 million BNB tokens.

Binance Coin was introduced in 2017 as a utility token with the purpose of providing reduced trading costs. However, its usage has grown to include a broad variety of applications on various platforms since then. It is also used to defray the costs of transactions on their native website. It may also be used to make payments on other websites, such as vacation lodgings, entertainment, and financial services.

What is coin burning on Binance?

BNB burns occur on a quarterly basis; with Q2 2021 concluding on June 30, Binance conducted their 16th quarterly coin burn. The recent Binance Coin burn occurred between July 15th and July 18th. Binance spends one-fifth of its quarterly earnings on repurchasing and permanently destroying, or “burning,” Binance coins stored in its treasury. This exchange has held these burning activities on a regular basis. They do to control the supply of the currencies, but anybody with a basic understanding of economics will tell you that when demand exceeds supply, the price of the asset appreciates. Therefore, this must be the rationale behind this burning. 

Additionally, 5,163 BNB coins were destroyed as part of the exchange’s Pioneer Burn Program, which assists customers who have lost tokens due to honest errors in smart contract transactions. The remaining locked BNB has been unlocked and moved to the team address as per their whitepaper. Except for the purpose of burning, the Binance team has never utilized or sold a single BNB from the team allotment, according to the firm.

This burn has quickly become one of the most anticipated events in the Binance community. This time, the firm disposed of almost $400 million worth of BNB. It should be noted that although Binance burnt more currencies than in the last quarterly burn, the cumulative worth of these coins was lower in this edition. This implies the market is in a state of stasis as BNB’s price has dropped since its previous burning. This is also evident in the markets’ reaction to the coin burn, as there was no discernible movement. 

BNB’s Performance

Binance has had a difficult time lately as a result of regulatory pressure from several nations. This exchange has been fighting authorities on several fronts, with the United Kingdom, Germany, and Hong Kong as they were exerting considerable regulatory pressure.

Many banks in the United Kingdom have also prohibited their clients from dealing with the exchange, as the country’s financial authority cracks down on unregulated cryptocurrency trading sites. The effect of these factors can be seen in the chart below, where Binance’s prices have fallen precipitously and have been fighting to regain their prior levels.

Binance Coin Price Forecast

The BNB/USDT price chart above shows the evident support and resistance line at around $334; this line has been tested as both support and resistance in the past. Binance coin has seen a dip on June 21st, which broke this level, and since then, the Binance coin hasn’t been able to show much action near these levels. Many anticipated that the burn would let the coin break out from this level and go to higher levels. Despite the scale of the burn, the event appears to have had little impact on the Binance Coin markets. Since the time of the burn, the coin has been majorly bearish. 

As an event of this magnitude could not move the prices of the coin in the way that it wanted, we opine that it requires strong backing from fundamentals. That means Binance is supposed to figure out a way to milk the regulatory battles and that they should make sure they paint a good picture about their company and the coin. As the price action is looking very bearish to neutral, working on portraying good fundamentals would be the key to change the fate of the coin. 

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Investment Disclaimer

This article is purely for educational purposes, and this doesn’t include any investment advice. Readers are requested to do their research before they consider investing.

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