Binance Coin $BNB: Price Action Catalysts & Business Model Explained
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The recent price developments of Binance Coin (BNB) shocked a lot of people in the cryptocurrency community as the coin successfully decoupled from Bitcoin in its USD valuation, a feat that many other projects has not been able to achieve. In this write-up, we’re going to take a different approach from the usual fundamentals overview and analyze Binance’s revenue models as a company, the use-cases of BNB token, and possible catalysts that led to its recent price developments.
Background & Introduction
Binance as a company was founded in September of 2017, just a couple months prior to the bull-run that brought a lot of exposure towards the blockchain-cryptocurrency industry. Led by its CEO, Changpeng Zhao, who previously built high-frequency trading systems for brokers, Binance garnered retail investor's popularity at a rapid pace due to its excellent service. If one were involved with cryptocurrency trading back then, it was obvious that better exchanges were necessary for the space to grow. Binance came in at the right time and it increased the quality standard for cryptocurrency exchanges.
Ever since then, Binance grew to be one of the most popular cryptocurrency exchanges in the world with #1 ranking in adjusted daily trading volume according to coinmarketcap. The recent fake trading volume report from BitWise research also gave Binance high credibility as it is still ranked #1 in trading volume amongst the top 10 “real exchanges”, indicating that its trading volume is genuine.
Exchanges have solid revenue models that have worked throughout the years, primarily from fees associated with activities being done on the platform. The unique aspect about Binance is how its revenue models are tied in together around its token, creating an ecosystem that bolsters the adoption of BNB.
Note: Binance has other initiatives such as its investment funds and collaboration with the Maltese government. This write-up is focusing on its revenue models that are solely coming from the exchange platform, without covering other income streams that Binance might have.
Trading volume is the #1 revenue source for an exchange due to the fees derived from it. As of April 1st of 2019, Binance charges 0.1% general trading fee and varied withdrawal fees depending on the coins. With a simple calculation, one can understand the state of exchange from its daily trading volume. For instance, Binance’s trading volume on 4/1/2019 is $872,751,163 — and 0.1% of that accounts to $872,751.163, which can be utilized for its daily operations. Binance also provides discounts for traders that hold BNB and utilize it as deductibles for trading fees, which proves to be a good incentive for large accounts as saving 50% in trading fees (0.05%) can be a game-changer.
The BNB discount rate dropped to 25% as of July 21st of 2018, but Binance introduced a new tiered trading fee discount program that can be benecial for market makers, essentially providing more liquidity for its exchange platform.
Other than that, Binance also charges listing fees for projects that want to be listed on its valuable token in the space. exchange, although the specic amount and process were never really disclosed.
Overall, Binance has been making steady profit ever since its inception. An article from Bitcoinist reported that Binance “made almost as much profit as Nasdaq in 2018” with only 4% of the sta  and CCN also reported that Binance was more profitable than Germany’s Deutsche Bank in Q1 2018 . Assuming the cryptocurrency adoption will keep on increasing as most millennials said that Bitcoin is the best way to save for the future , Binance’s trading volume will only go up, generating more revenues for the company.
As previously explained, Binance is really smart when it comes down to integrating their BNB token and ensuring that there are actual use-cases for it. Since the ICO, BNB has served as one of the primary sources of funding/income for Binance, with more than 10,000% ROI (yes, ten thousand percent) from its ICO price.
It also has multiple use-cases unlike many other “in-development” tokens, which includes:
● Fees Discounts
● Purchasing Goods and Services
● Loan collateral
● Fiat gateway
● Converting extremely small tokens sizes that can’t be utilized for trading to BNB The picture below showcases all of the use-cases of BNB token:
Binance has been able to ensure customers that its BNB token has value. For comparison purposes, presented below are the charts of 5 other exchanges tokens in relation to the overall trading volume on their site.
Binance is one of the very few coins that have been able to decouple from Bitcoin’s price, meaning that its USD valuation does not move in an aligned manner with Bitcoin’s USD price anymore. This is an extremely great feat as most currencies, even those in the top 10, still, follow Bitcoin’s price most of the time. Presented below is a chart comparing BNB/USD and BTC/USD price movement since the last BTC price drop from $6000 to $3000 until April 1st of 2019.
One possible cause of this decoupling event is BNB’s quarterly scheduled coin burn , which will eventually reduce the BNB supply from to only 100MM BNB.
As one can see, coin burns did not seem to have a clear bullish/bearish effect in the past, implying that perhaps Binance Launchpad’s Initial Exchange Offering is the primary source.
Initial Exchange Offerings are generally a form of partnership between the projects and the exchanges. Binance puts its credibility on the line by allowing investors to trust Binance’s due diligence process, ensuring that the companies being chosen for the IEOs are legitimate projects. These projects are then required to pay a listing fee that is usually conducted in BTC or the exchanges native token and to allocate a certain percentage of their token supply for the exchanges to incentivize the projects’ success. However, the most important part that could have propelled BNB price is the fact that investors are given the options to utilize either BNB or the tokens that these projects were built on during an IEOs. Thus, unlike ICOs which only require investors to send money to a specific smart-contract wallet that handles the token sale process, IEOs require investors to have a balance inside their Binance accounts in order to participate in the fundraising process, potentially increasing the BNB token value.
$BNB Token under the guidance of Binance has become one of the most functional crypto assets in the space with an ecosystem built around it that allows consumers to experience the entire landscape of the blockchain-cryptocurrency-blockchain industry, making it one of the most Other than that, Binance also charges listing fees for projects that want to be listed on its valuable token in the space.