Binance Coin (BNB), the native token of Binance Chain and Binance Smart Chain (BSC), surged by 55% in 13 days. Some high-profile investors anticipated the strong performance of BNB following the release of BSC.
The daily price chart of Binance Coin. Source: BNBUSDT on TradingView.com
On September 12, Kelvin Koh at the Asia-based cryptocurrency investment firm Spartan Group, said BNB would likely rally due to staking.
With the launch of Binance Smart Chain and the launch pool, it became possible for users to stake Binance Coin on Binance. That enables users to earn yield, similar to yield farming on Ethereum-based DeFi platforms.
Staking and Binance Smart Chain Causes Binance Coin (BNB) Demand to Spike
In recent months, the DeFi craze has led Ethereum and Uniswap activity to surge. Users are staking various assets like Ethereum (ETH) and Wrapped Bitcoin to earn yield on DeFi platforms.
Consequently, the total value locked in Ethereum-based DeFi protocols surged from $1.88 billion on July 1 to $9.1 billion on September 18.
The introduction of native BNB staking made the asset more compelling for mainstream users, Koh said. He explained:
“For the past 8 months, $BNB has been a really boring asset. That changed with launch pool. Imagine holding an asset that can consistently generate a high yield simply by staking it on Binance. No need to worry about SC risk, anon founders, metamask or yield farming strategies.”
BNB has struggled to record a major rally throughout the first half of 2020. Subsequent to the release of Binance Smart Chain and the launch pool, Koh said he anticipates the demand to rise.
Emphasizing on the constant demand for Binance Coin the launch pool and DeFi growth creates, Koh added:
“As the DeFi boom makes its way into the mainstream media, it will draw new comers into crypto who will likely probably participate in yield farming this way. For $BNB, this creates a constant demand for holding/staking the token making it an attractive asset to own. Meanwhile fees that accrue from the exchange continue to burn existing supply. I expect $BNB to claw back the underperformance YTD as a result.”
Binance Smart Chain Transaction Volume Grows
Atop the rising demand for Binance Coin, the Binance Smart Chain transaction volume is also rapidly surging.
Changpeng Zhao, the CEO of Binance, said:
“BSC transaction volume is now 26% of ETH. Did a quarter of users move already? or is this just demand that was curbed due to high fees? Looks like the later as ETH tx count didn’t drop much. Growing, not taking, the pie.”
Whether Binance Smart Chain would be able to compete against major blockchain networks in the DeFi space over the long run remains uncertain.
Binance Smart Chain daily transaction chart. Source: BSCScan.com, Changpeng Zhao
With Ethereum leading the market, interoperable blockchains such as Polkadot and Cosmos are arising as potential competitors.