Binance: A Giant Trying To Regain Its Footing In An Off-Balance Market (BNB-USD)

Binance Coin USD (BNB-USD) remains plagued with scrutiny and skepticism. After a massive market meltdown in 2022, multiple shocks shook digital asset foundations, including the stablecoin collapse and FTX (FTT-USD) fallout. It is no surprise BNB-USD is not spared from the negative impact. In addition, its recent controversy may erode its value to more mainstream investors. We can see it in outflows that continue despite the founder’s reassurance.

Nevertheless, its trading price is moving sideways after a series of rebounds recently. Also, BNB’s Bitcoin (BTC-USD) balance remains more stable than its peers. As such, I don’t consider it another FTX in the making.

Right now, we must weigh its opportunities and risks this year. It continues to reign the market as a giant and capitalizes on the weakness of its competitors. Yes, its potential may not materialize soon, but hope still floats. As a market leader, it still has a competitive advantage over its peers.

Binance 2023: A New High Or Just Hype?

Since 2017, Binance has flourished, becoming the largest crypto exchange company. As a blockchain giant, it designed an environment solely for crypto-related functionalities. It has peaked in the last two years as more popular cryptocurrencies circulated. It has enjoyed an impeccable bull run, reaching all-time highs. But 2022 was a roller coaster ride as shocks and opportunities came simultaneously. The market meltdown became more evident as inflation and interest rate hikes intensified. These macroeconomic changes have reduced the appetite for cryptocurrencies. In turn, Binance’s price took a nosedive. The price remains hammered, although it has shown a slight uptrend in the last month.

Despite all these, Binance emerged as one of the biggest winners after the FTX collapse. From its less than 10% BTC market share in 2017-2018, it skyrocketed last year. Now, it holds over 20% of the Bitcoin supply on crypto exchanges. Also, it has massive control of the spot and derivatives market volume.

However, Binance seems to cling to relative performance rather than absolute strength. I find it wise, though, as the market remains hammered. Its absolute strength and rebound potential this year remains to be seen. As such, it has to prove its capacity to sustain itself with all the risks it faces.

Moreover, Bitcoin outflows shocked the market, amounting to $3 billion in 24 hours. Recent data shows a continuation of losses. Despite the efforts to regain value, the outcome remains unfavorable. The BTC downtrend reduces capital inflows and BNB market value. From about 595,864 BTC balance, it now only has 512,759, a 14% drop in less than a month. Thankfully, its percentage to total BTC trading volume remains at over 3%. Meanwhile, the multichain token value had 4.5 million net outflows last week. Its market share in token allocation is now 24% from 28% in December.

On a lighter note, Binance sustains its relative stability and power. It appears more secure, unlike FTX, which showed excessive price and balance drops before its bankruptcy. Also, BTC outflows on Binance are more manageable than most of its close peers. Its current monthly decrease rate is only 0.9% compared to the peer average of 3.4%. We can also see how it swiftly took the lead from Coinbase (COIN). Its overall token outflows are more controlled than the rest.

Although outflows persist, Binance’s price moves sideways after a sharp uptrend recently. It may offer a potential opportunity and entry point to buy Binance coins. It continues to reign the market with its increasing volume share. But right now, it depends on relative performance rather than absolute durability. Put simply, its peers mess up more than it does. Meanwhile, external factors may have mixed impacts that may offset each other. I will discuss them one by one in the next section. Binance Coin maintains a solid market standing, but investors must be careful before buying.

Economy

The crypto market may remain hammered this year. Outflows may increase as recessionary headwinds remain bothersome. Fortunately, there is now a continued inflation lull. Interest rate hikes may persist, but increments may be lower than anticipated.

We can see the pattern between inflation and BNB’s price. As inflation peaked, the price dropped. In the subsequent months, BNB’s price increased again as inflation started to lull. But it did not bounce back to its previous highs. We may attribute it to the impact of interest rate hikes. In essence, interest rate hikes require people to increase their liquidity. It is no wonder investors tend to withdraw or shift to more liquid assets. It is one of the reasons I don’t expect a sharp rebound this year. Interest rates must stabilize first before BNB can sustain its rebound. It is not easy to observe the price trend, but the historical changes show an inverse relationship. And even if it has not regained its value yet, BNB price appears more stable as the inflation lull continues.

In the following years, I expect a more manageable economy. It is feasible for me since labor market conditions are still a far cry from the Great Recession. Purchasing power and business stability may improve as inflation keeps decreasing. In turn, the Fed may start to lower interest rates. With that, I also anticipate BNB’s sustained rebound. Portfolio diversification may increase, and crypto inflows may resume. BNB rebound may take more time and effort, but it may be fruitful. As such, we must determine if BNB can withstand macroeconomic headwinds. Does BNB-USD have adequate capacity to sustain itself amidst capital outflows? Investors must determine how long it can last. We must consider its current performance and assets.

Investigation

The money laundering investigation by the DOJ also puts downward pressure on Binance. The investigation started in 2018, and several federal prosecutors believe in the substance of the evidence. But until now, they remain split over filing criminal charges against the executives, including the founder.

It may become costly for Binance, especially now the market remains down. It can also contribute to the continued crypto outflows in the exchange. More coins are at stake, so it must maintain liquidity to cover all potential capital outflows and legal expenses.

Financial Positioning

Before the year ended, Binance had nearly $70 billion in digital assets. It shows an adequate capacity to sustain its operations despite market disruptions. However, Binance already bled a considerable portion of assets about two months after its November peak. If we estimate all the outflows and value reductions in the last two months, it has already lost about $15-20 billion. These may comprise about $10-15 billion in foregone assets and BTC and other coin outflows. Most of these reductions occurred after its transparency release. Hence, it is safe to assume that it now has $52-54 billion in assets after the outflows and price changes.

Other analysts are more pessimistic, as their average estimates amount to nearly $50 billion. This aspect must work hand-in-hand with the first two aspects that may affect Binance. It may hint at its sustainability amidst investigations should outflows continue.

Despite this, it has adequate means to cover its trading volume and prices. It has $44 billion in market capitalization. The margin is still about 12-20%. BNB shows sustainability, but investors must take extra precautions before buying.

Price Assessment

We have already assessed BNB using the impact of macroeconomic indicators. While doing so cannot guarantee the right assessment, the historical pattern appears logical. We can also see that many other factors contribute to its fluctuations aside from the above-mentioned aspects. In this part, we will look into the price change itself.

After its continued decline last month, BNB’s price had a notable rebound recently. It has already risen above the set resistance level of $250. Now, it appears to be the new support level, which can confirm and entice new trader entries.

As it expands again, potential buyers can wait for a dip within $250-255. For the bullish pattern to continue, I set the new support level at $245-246. We can set a new resistance of $295-300. But we must be more careful since dips below our support level can convey a bull trap. It can also serve as a confirmation of the bearish pattern three weeks ago. If true, sellers can set a base at $220-225, which may serve as a new low level.

Bottom line

Binance Coin USD can be a huge rebound-drop mix this year. It faces headwinds, which may intensify this year. Even so, its market standing stays solid, allowing it to capitalize on size and popularity. Potential growth avenues should not be discounted, although the risks still offset them. Of course, one may not expect these things to materialize anytime soon. Mixed market conditions may offset each other’s impact. The new price pattern of each Binance coin remains to be seen, so interested buyers may have to wait for a better entry point. The recommendation, for now, is that Binance Coin USD is a hold.