BNB (BNB), the native token of the BNB chain, fell 16.1% between August 23 and September 2, dropping from a high of $598.80 to a low of $502.10. However, significant buying activity has been seen below $510, causing BNB to recover some of its losses and is currently trading at $517.
Investors are concerned that BNB may have entered a bear market, especially since the token has not been able to hold above $610 since mid-June.
Reduced activity on the BNB chain creates selling pressure
BNB chain indicators show a decline in interest, especially in decentralized exchange (DEX) volumes. As a result, traders are questioning whether the $400 level from August 5 can be retested.
Some market participants suggest that BNB will only break out of its consolidation pattern after its co-founder and former CEO Changpeng “CZ” Zhao is released from detention in the U.S. While there is no direct correlation between CZ and BNB prices, his strong personality and the anticipation surrounding his release are likely to influence the market.
source: Degen.S
Anonymous altcoin trader and user X Degen.eth shared his views, predicting that the price of BNB will surge after the Binance founder pleaded guilty to money laundering charges and is expected to be released after serving four months in prison.
Even if this “crazy green candle” comes to fruition, traders will likely try to bring the event forward by buying before the CZ launch and then taking profits as the date approaches. Therefore, buying BNB solely on the expectation of a CZ launch seems risky, especially given the recent weakness in BNB chain activity.
In a broader sense, despite its recent underperformance, BNB remains the third-largest cryptocurrency by market cap, excluding stablecoins, with a current value of $75.7 billion. For context, this represents a 23% premium over SOL (SOL)’s market cap of $61.5 billion.
Interestingly, the Solana network has more deposits in smart contracts than the BNB chain. What makes things worse is that the total value locked (TVL) on the BNB chain recently fell to its lowest level since February 2021. This suggests that investors are looking for better opportunities elsewhere, with total crypto TVL up 27% since the beginning of 2024.
BNB Chain TVL in BNB terms. Source: DefiLlama
According to data, total deposits in smart contracts on BNB Chain fell to 7.5 million BNB on August 20, a 14% decrease over three months. Major DEX PancakeSwap saw its TVL drop by 15% to 2.93 million BNB, while decentralized launchpad PinkSale saw its TVL drop by 26%.
To put this into perspective, the TVL on the Ethereum network grew by 7% in ETH terms between May 20 and August 20, while Solana network deposits grew by 28% in SOL terms over the same period. So it appears that this network is the only one driving investors away from decentralized applications (DApps) on the BNB chain.
relevant: Ethereum Layer 1 Network Yields Are Crashing. What’s Causing This?
The BNB chain is gradually weakening in DEX activity, which is concerning.
According to DefiLlama data, BNB Chain’s DEX volumes fell by 24% in the seven days ending September 2, significantly underperforming Ethereum, which saw a 4% drop in activity during the same period. Similarly, DappRadar reported that the number of active addresses participating in BNB Chain smart contracts fell by 18% in the same seven days, while Ethereum saw a 5% drop.
What’s even more concerning is that according to DappRadar data, the top five BNB chain DApps all saw a significant decline in active users over the seven-day period. These include Move Stake, Treasure Ship Game, PancakeSwap, StarryNift, and Galxe, indicating that the downturn has impacted games, staking services, DEXs, and Web3 applications.
Essentially, some of the recent BNB price downtrend appears to be related to the decrease in activity and deposits on the BNB chain. This does not invalidate the hypothesis that BNB could rally back to $600 due to the excitement surrounding CZ’s detention, but it does suggest that there is little fundamental reason to be bullish.
This article is for general information purposes only and is not intended to be, and should not be taken as, legal or investment advice. The views, thoughts and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.