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BNB (BNB) In the seven days to March 29, prices rose 12%, reaching a near two-week high of $620. This increase narrowed the valuation gap with its main competitor, Ether (ETH), which posted a 5% gain over the same time frame. However, mixed signals from BNB Chain data on the chain suggest that the rally may be overstretched.
From spot Bitcoin ETF flows and Diffie Momentum in BNB price
Market analysts note that the cryptocurrency market's upward trend is closely linked to inflows into spot Bitcoin (BTC) exchange-traded funds (ETFs), which experienced a setback in the week ending March 23. In January, these financial instruments saw a net outflow of $890 million. On a positive note, the latest figures indicate that withdrawals from the greyscale GBTC fund have dropped significantly, with only $104 million remaining as of March 28.
In the first half of March, the price of BNB increased by 61.7%, but this speed changed after reaching the peak of $645, which corresponds to a capitalization of $96.4 billion. For context, BNB hit an all-time high valuation of $116 billion in November 2021. Interestingly, the total value locked on the BNB Chain (TVL), which represents the total deposits in the network's smart contracts, was $15.7 billion at that peak. After falling to just $7.1 billion, it represents a 55 percent decline.
It is important to note that the entire crypto market, especially decentralized finance (DeFi), will contract significantly from the end of 2021. Therefore, it is not fair to single out BNB Chain's TVL as declining. For example, the total market capitalization of blockchains tracked by Defilama, which was once around $205 billion, is now $155 billion, a 25 percent decrease.
Therefore, a detailed examination of BNB Chain's TVL is warranted, especially in comparison to direct competitors such as Ethereum and Solana (SOL). BNB Chain smart contract deposits fell to their lowest level since March 2021, down 10% over two months, in contrast to Ethereum's 8% TVL in ETH terms and Solana's TVL, which jumped 29% since Jan 28, as reported by DefiLlama. .
The movement of BNB Chain looks promising
TVL should not be the sole indicator of blockchain success. Many decentralized applications (DApps), including intangible token (NFT) marketplaces, games, decentralized betting, aggregators, and social networks, do not require large deposits. In the last week alone, nearly 2 million addresses were participating with DApps on the BNB Chain.
BNB Chain's activity levels rival Ethereum's most active layer-2 networks, boasting comparable active addresses. Notably, while Solana's active addresses are up 14 percent over the same time frame, no other blockchain comes close to Ethereum's seven-day trading volume of BNB Chain at $12.4 billion. Moreover, while Solana and Ethereum decreased in size, BNB Chain's trading volume increased by 11%.
Predicting future trends in the cryptocurrency sector has great challenges. A more reliable approach involves examining benchmarks such as leverage in BNB durable futures contracts, which serve as indicators of market demand. A key parameter to consider is funding ratio: A positive funding ratio indicates a tendency among traders to exercise leverage in their long positions.
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The latest data shows that demand for leveraged long positions has increased, with the 8-hour funding rate remaining at 0.03%, or about 0.6% weekly. Often, when traders feel positive about the market, this rate can rise by more than 1.2% per week. Therefore, despite the price struggle of BNB against the $620 level, the market sentiment is still optimistic.
This article is not intended for general information purposes and should not be construed as legal or investment advice. The views, ideas and opinions expressed herein are solely those of the author and do not necessarily represent the views and opinions of Cointelegraph.
