BNB, the token of the BNB chain, has hit an ath of $723 on 6 June. But soon it adjusted to $705 as the new price. Nevertheless, the BNB has gained an impressive 19% in value within the first 6 days of June alone. This is in stark contrast to the 4. 2% increase witnessed in the total market capitalization of the total crypto market in the same period. If traders look at this rally, they are trying to find factors that may continue to push higher the price of the BNB token.
It is rather peculiar that the BNB rally started as Binance’s founder Changpeng “CZ” Zhao was in jail for money laundering starting from June 1. As expected after the court sentencing on April 30, however, his imprisonment hampers his input to Binance’s direction and operation substantially. This development makes one wonder about the viability of a sustained BNB price increase during internal conflict.
Others have opined that the BNB rally was occasioned by leverage from buyers employing derivatives, specifically the FOMO traders. This theory received support when the open interest in BNB futures crossed $1 billion for the first time on June 6. Yet the futures open interest only gives the total number of aggregate contracts which are out in the market and does not reveal as to whether more leverage is required by the buyers (longs) or the sellers (shorts). Thus, 18% increase in six days cannot be explained by derivatives markets on the basis of this data.
Thus, to evaluate traders’ interest, one should focus on perpetual futures which are also called inverse swaps. These contracts have an embedded rate that is adjusted every eight hours to address leverage demand asymmetry. A positive sign shows buyers’ preference for the use of leverage by sellers. In the last six days, the funding rate has remained below 0. Avg, which is not considered expensive for most traders, stands at 03%. This 0. BNB has a weekly funding rate of 2% which is similar to Bitcoin but lower than Solana at the current 0. 5%. Consequently, it is not logical to attribute the recent rally above $710 to excessive leverage in BNB futures usage.
Looking at the DApps activity, BNB Chain still holds a strong position in terms of volumes, whereas Solana is still behind in terms of the rankings. The past week saw BNB Chain record a 23% increase in volumes, and this comes at the expense of other competing blockchains. Nonetheless, BNB Chain’s reasonably stable active addresses interacting with the DApps leave questions about the efficiency of user acquisition. Moreover, the seven-day volume of BNB Chain is $6 billion, while Ethereum’s volume is $40 billion. 5 billion activity throughout the same time period.
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