News about price spikes in cryptocurrencies are becoming a rare occurrence. Binance Coin (BNB) managed to increase its price from $5.54 to $9.7 for a little less than a month. The price increase against the US dollar was 75%. While Binance Coin made this impressive leap, the total crypto market cap lost $3 billion.
Binance Coin has now become a top 10 cryptocurrency for the first time in its history. Experts believe there are quite a few factors, which have contributed to the currency’s rise contrary to the market. Binance’s performance in the bear market, the decreasing circulating supply and the prospect of a decentralized exchange have all played their part.
Back on January 16th, the Binance team resorted to the increasingly popular strategy of token destruction. The team destroyed tokens worth $9.4 million and thus eliminated a portion of the circulating supply of the asset.
Changpeng Zhao jokingly stated:
“The burn is complete. I still remember back I did the first burn of $1 500 000 equivalent in BNB, I was nervous as hell. Now, I’m actually still nervous, lol. This is legitimately the fastest way to spend money.”
The token destruction had almost instantaneous results. After the burn on January 16th, 1 623 818 Binance Coin tokens were destroyed. This resulted in a substantial increase of the asset’s price. This has become a quarterly occurrence as Binance is now burning the circulating supply of BNB with the profits generated by the exchange.
BNB started off small
During the company’s early stages, BNB was simply used as a means of financing. As time passed and Binance quickly established its place as a top respected exchange, the company began using 20% of the profits to buy back the BNB tokens and burn them.
The whitepaper of Binance states that:
“Every quarter, we will use 20% of the profits to buy back BNB and destroy them. This will keep happening until we buy 50% of all the BNB (100MM) back. Every single buy-back transaction will be announced on the blockchain. The end goal will see us destroy 100MM BNB, leaving only 100MM BNB remaining.”
With the demand for BNB growing and the supply declining, in less than a month the price increased by more than 75%. At the moment, BNB is down 61% from its all-time high, but it’s still the best performing cryptocurrency in the prolonged bear market.
The last week saw a strong rally which was mainly driven by technical factors. The market saw a huge $10 billion gain overnight which saw assets like EOS and Litecoin to surge up to 20%. Traders are not optimistic however. Most of them believe the market will retrace its large gains and the crypto assets will not be able to sustain their current momentum.
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