BNB (BNB), the native token of the BNB chain, surged 6% on August 8, breaking through the $500 resistance level. However, BNB still fell 9% on the week as there was a significant correction in early August as investor interest in cryptocurrencies waned.
Despite this, BNB has outperformed most altcoins, falling just 1% over the past 30 days, while the overall altcoin market cap (excluding stablecoins) has fallen 7% over the same period.
An improved macroeconomic outlook has boosted the BNB price.
Traders are now questioning whether BNB can reclaim its late July high of $590 and what effect the changing sentiment has on the health of the network. According to Yahoo Finance, analysts believe that investor sentiment has improved following better-than-expected U.S. jobs data. This optimism was reflected in the S&P 500 index, which rose 1.9% on August 8, and crude oil, which rose 1.1%. Traders have become more risk-averse and are betting that interest rates will fall throughout 2024.
The yield on the U.S. 5-year Treasury note, which hit a low of 3.46% on August 5, surged to 3.85% on August 8, indicating that traders are demanding higher yields on fixed income assets. Such moves generally reflect distrust in the Federal Reserve’s ability to control inflation without triggering a recession. Since the central bank may have to cut rates and buy bonds again in a recession, this could reduce the cost of capital while also increasing inflationary pressures, potentially boosting corporate profits.
Much of BNB’s appeal comes from the benefits of the Binance exchange, including discounted trading fees and access to exclusive Launchpad offers. According to DefiLlama data, the $2.8 billion inflow between August 5 and August 7 reinforces Binance’s leadership in deposits and improves trader sentiment, especially considering that former Binance CEO and co-founder Changpeng “CZ” Zhao is still in prison.
To see if traders are more confident about BNB after BNB regains $500 support, we need to look at derivatives indicators, especially the leverage demand between longs (buyers) and shorts (sellers). Exchanges typically settle perpetual contracts every 8 hours, and the side that demands more leverage charges a fee. When traders are confident, longs pay more than 1.2% per month, while a negative funding ratio indicates a bearish market.
According to the data, BNB’s funding ratio has been negligible for the past few days after a brief period of deficit. The absence of excessive leverage is positive, as it leaves room for the bulls to increase their positions when needed. However, the lack of enthusiasm is somewhat concerning, even after BNB’s 23% price increase in three days.
BNB Chain Activity Surges, Network Deposits Lagging Behind Competitors
Beyond the derivatives market, it is important to evaluate how the BNB chain compares to its competitors in terms of deposits and activity. On-chain metrics provide insight into whether real-world use cases support the valuation of BNB and the network’s attractiveness to new entrants and project launches.
relevant: Solana’s first game, SVM, has surpassed 1 million monthly active users.
The total value locked (TVL) on the BNB chain reached 8.8 million BNB on August 7, up 9% from two weeks ago. In comparison, Solana’s TVL grew 21% in SOL terms over the same period, while Ethereum deposits grew 14% in ETH terms. Avalanche experienced 29% TVL growth in AVAX terms over two weeks. Despite the nominal increase, BNB chain decentralized application deposits lagged behind its competitors.
According to the latest data from DappRadar, BNB Chain’s decentralized application volume has surged over the past seven days, outpacing Ethereum’s 45% growth and Polygon’s 84% growth. In terms of active addresses (UAWs) interacting with dapps on the network, BNB Chain remained at 1.06 million over the seven days, while Ethereum saw a 1% decrease and Solana saw a 29% decrease in users.
Overall, the lack of demand for BNB futures leverage and the long and slow growth of TVL compared to competitors raise questions about the possibility of a bullish run towards $590. However, the robust on-chain activity justifies the recent price rally, suggesting that there is no reason for BNB to weaken below $500.
This article does not contain any investment advice or recommendations. All investment and trading moves involve risk, and readers should conduct their own research when making decisions.