BNB chain activity supports 11% rally, but can BNB push above $300?

Binance Coin, the native token of BSC Chain (BNB), rose 11% to reach its highest level in 6 months and took a different direction from the broader cryptocurrency market on December 26. Although BNB initially struggled to break the $300 resistance, the rally opened the market capitalization of Solana (SOL). The gap has been successfully closed.

Before December 23, BNB held the position of the third largest cryptocurrency (excluding stablecoins). However, SOL's impressive 50% gain in seven days has changed that. The question now is whether BNB can maintain a market value of more than $46 billion to regain its third position. Both BSC Chain and Solana, despite their decentralized nature, offer a fast and cost-effective blockchain that does not rely solely on layer-2 scaling solutions.

A significant part of the value of the BNB token comes from reduced trading fees and special launchpad offers and services from Binance. Investors initially feared the exchange could lose ground quickly after founder Changpeng ‘CZ' Zhao pleaded guilty to US federal charges on November 21. But this was not the case, at least until the trial was over and Binance was secured. Report all transactions to a custodian designated by the Department of Justice. In addition, Binance's recent communication with the US Commodity Futures Trading Commission (CFTC) on December 18 further reduced the risk of a regulatory shutdown.

However, BNB is facing selling pressure due to high ownership concentration among Binance founders and team. The lack of transparency regarding the initial distribution of BNB tokens has eroded investor confidence, especially after the exchange changed its token burning method over the years. Essentially, the original commitment to buyback using funds from Binance's exchange has been replaced by a simple burn method.

Increase in DApp transactions and support BNB price movement

Different valuation models can be created for the BNB token, but no one can explain exactly how most market participants will evaluate its benefits and risks. However, it's worth comparing how the network performs with competing chains. The effective use of decentralized applications (DApps) on the BNB Smart Chain shows the demand for the BNB token. In addition to Binance products and offerings, the value of the BNB token largely depends on its usage in the BSC Chain.

BSC Chain currently holds $3.6 billion in total value locked (TVL), which is the sum of deposits in smart contracts, which is 13 percent less than Ethereum's $28.2 billion. More significantly, it is less than the $4.6 billion held by Ethereum's top volume solutions, namely Arbitrum, Optimism, Polygon and Base. BSC Chain's TVL has increased by 25% in the last 30 days, while other incumbents like Solana and Avalanche have gained 142% and 50%, respectively, over the same period.

When analyzing networks focused on DApp performance, volume should be a primary consideration with the number of addresses associated with smart contracts as a proxy for user numbers.

Ethereum (ETH) and Layer-2 scrounging solutions remain unchallenged in terms of volume, accumulating more than $46.4 billion in the past 30 days, with Ethereum's base layer accounting for 73 percent of that volume. In contrast, BSC Chain collected $4.7 billion in volume during the same period, a 6 percent increase from the previous month. However, when accounting for Active Unique Addresses (UAW), BSC Chain, Solana and zkSync Era lead. This raises the question of whether those numbers accurately represent the truth.

In relative terms, BSC Chain has seen a 7% growth in the number of addresses connecting to DApps in 30 days, especially compared to Ethereum's 12% increase over the same period.

Similarly, Solana had a 28% gain on the UAW scale. Therefore, the recent BNB price increase cannot be solely due to the activity on the BSC Chain or its increase in TVL compared to other blockchains. This doesn't necessarily mean that BNB's value will decline, but until the movement picks up, it will be a challenge to reclaim third place by market capitalization.

This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.