BNB DApp Drops 25% In One Week – Will BNB Price Follow?

BNB (BNB), the native token of the BNB Chain, gained 4.1% from October 10 to October 11, showing strength after briefly testing the $555 support level. BNB's price has remained relatively stable since July, despite a 15.6% decline in the broader altcoin market. This performance gave BNB a massive $15 billion market capitalization advantage over Solana (SOL), cementing BNB as the third largest cryptocurrency.

Activity in the BNB chain is falling, and this could spell trouble for the price of BNB.

Over the past week, BNB Chain's Ochain activity has dropped by 37%, causing investors to worry about the sustainability of BNB's recent outperformance. Traders are particularly wary of the growing popularity of Ethereum layer-2 scaling solutions since the launch of the base network, which offers fast and exceptionally low costs with Coinbase, a major US exchange and Web3 wallet provider.

The price of BNB is partly driven by Binance exchange offerings, including exclusive launchpad access and trade fee discounts, which may reduce the demand for BNB usage on the BNB Chain itself. However, beyond network transaction payments, BNB is widely used in the ecosystem of decentralized applications (DApps) for trading, retail, agriculture, real world assets (RWA), lending, launchpads, games and derivatives markets.

To assess whether activity on the BNB Chain is supporting the value of BNB, it is important to examine onchain deposits and network fees as key indicators.

Currently, the BNB Chain's Total Value Locked (TVL) stands at 8.1 million BNB, little change from two months ago. However, network charges fell to their lowest level in more than four years in the week ending October 7. The accumulated 1,880 BNB payouts for that period represented a 56 percent decrease compared to last week.

The decline in fees is mainly due to a 25% decrease in DApp volumes on the BNB Chain, which may be a concern for the BNB price perspective. Notable underperformers were PancakeSwap, down 25% on a weekly basis, and Uniswap, down 22%. In comparison, Ethereum dapps saw a 9% decline over the same period, according to Defillama, while Solana saw a 15% drop in onchain activity.

As for deposits, Ethereum TVL is at 19.2 million ETH, unchanged from two months ago. Meanwhile, Solana Network's TVL has risen to 40.9 million SOL, the highest level in two years, which is a 26 percent increase in the last two months. In fact, BNB Chain's activity has lagged slightly behind its competitors, which does not support BNB's recent performance relative to the broader altcoin market.

How sustainable is the Binance Launchpad?

Along with the factors that limit the price of BNB upwards, there has been heavy criticism of Binance's listing fees. According to BitMEX co-founder and former CEO Arthur Hayes, token issuers are required to purchase and hold ~$5 million worth of BNB and provide up to 16% of the token supply.

Ignace, co-founder of Pink Brains DeFi Creator Studio, points out that Ethereum could have launched its Layer-2 rollout simulation with a decentralized launch pool, allocating only 5.5% of its supply to liquid incentives. This approach would have boosted ecosystem activity and ultimately forced major centralized exchanges (CEXs) to voluntarily list the token. Ignas argues that paid CEX listings rarely create long-term holding incentives.

Related: Web3 Momentum Accelerates at Binance Blockchain Week in Dubai 2024

Amidst these criticisms, other market analysts are concerned about the poor performance of recently launched tokens on Binance. In particular, Hamster Kombat (HMSTR), Catizen (CATI) and DOGS experienced significant negative price action, according to X user ZerebusX, who commented, “This is not the Binance we know, and it is not what CZ wanted Binance to be. “

Therefore, the outlook for BNB value will be influenced by weaker activity on the BNB Chain and broader sentiment for Binance's exchange services, including its launchpad offerings.

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.