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BNB Chain DEX Volumes Drop 24% in a Week — Is BNB Facing Trouble?
The price of Binance Coin (BNB), the native token of the BNB Chain, has faced significant challenges recently. Some investors believe that the release of Changpeng “CZ” Zhao, Binance’s co-founder and former CEO, could potentially lead to a surge in BNB’s price, even as the network’s underlying fundamentals continue to deteriorate.
Between August 23 and September 2, BNB experienced a steep decline of 16.1%, dropping from a high of $598.80 to a low of $502.10. Despite this downturn, substantial buying interest emerged when the token approached the $510 mark, allowing BNB to recover some of its losses, with the current trading price hovering around $517.
This situation has raised concerns among investors, who fear that BNB may have entered a bearish phase. The token has struggled to maintain a price above $610 since mid-June, which further fuels worries about its long-term performance.
Declining Activity on BNB Chain Increases Selling Pressure
Metrics from the BNB Chain suggest a waning interest in the network, particularly evidenced by a significant drop in decentralized exchange (DEX) volumes. This decline has led traders to speculate whether the token might revisit the $400 level, last seen on August 5.
Some market observers argue that BNB will only break out of its current consolidation phase once Changpeng “CZ” Zhao is released from detention in the United States. While there is no direct evidence linking CZ’s situation to the token’s price, his influential presence in the cryptocurrency community and the anticipation surrounding his release could have a psychological impact on the market.
A prominent altcoin trader known as Degen.eth expressed his views on X (formerly Twitter), predicting that BNB’s price might experience a significant surge following CZ’s release. The trader speculated that CZ, who is expected to be freed after pleading guilty to money laundering charges and serving a four-month sentence, could trigger a strong market reaction.
However, even if this anticipated price spike occurs, it is likely that some traders will attempt to “front-run” the event, buying BNB in advance of CZ’s release and then selling for profits as the release date approaches. As a result, relying solely on the expectation of CZ’s release to invest in BNB may be risky, especially considering the recent downturn in BNB Chain’s activity.
BNB Chain’s Market Position and Network Challenges
Despite its recent struggles, BNB remains a major player in the cryptocurrency market. Excluding stablecoins, BNB is the third-largest cryptocurrency by market capitalization, currently valued at approximately $75.7 billion. This places it at a 23% premium over Solana (SOL), which has a market cap of $61.5 billion.
Interestingly, the Solana network has managed to attract higher deposits in its smart contracts compared to BNB Chain. This disparity is compounded by the fact that BNB Chain’s total value locked (TVL) recently hit its lowest point since February 2021, indicating that investors are finding more lucrative opportunities elsewhere. In contrast, the total cryptocurrency TVL has grown by 27% year-to-date in 2024.
Data reveals that the total deposits in BNB Chain’s smart contracts fell to 7.5 million BNB as of August 20, marking a 14% decline over the past three months. Notable decreases include PancakeSwap, the leading DEX on BNB Chain, which saw its TVL drop by 15% to 2.93 million BNB, and PinkSale, a decentralized launchpad, which experienced a 26% decline in TVL.
To put these figures into perspective, the Ethereum network’s TVL increased by 7% in Ether (ETH) terms between May 20 and August 20, while Solana’s deposits rose by 28% in SOL terms during the same period. These trends suggest that the factors driving investors away from BNB Chain’s decentralized applications (DApps) are specific to this network.
BNB Chain’s Declining DEX Activity Raises Concerns
Data from DefiLlama indicates that BNB Chain’s DEX volumes plummeted by 24% in the seven days leading up to September 2. This decline is particularly alarming when compared to Ethereum, which only saw a 4% drop in activity during the same period. Additionally, DappRadar reports that the number of active addresses interacting with BNB Chain smart contracts decreased by 18% over the same seven days, while Ethereum’s active addresses only fell by 5%.
Even more concerning is that all of the top five BNB Chain DApps, including Move Stake, Treasure Ship Game, PancakeSwap, StarryNift, and Galxe, experienced a sharp decline in active users during this period. This downturn has affected a wide range of applications, from games and staking services to DEXs and Web3 platforms, indicating a broad-based decline in user engagement on the network.
Conclusion: BNB’s Price Decline Tied to Network Activity
In summary, the recent downtrend in BNB’s price appears to be closely linked to the declining activity and deposits on the BNB Chain. While the anticipation surrounding CZ’s release from custody could potentially lead to a temporary price rally, the lack of strong fundamentals suggests that there may be limited reasons to be optimistic about BNB’s long-term prospects.