CRYPTO MOVERS AND PRICES
Crypto is seeing a broad and aggressive sell-off after bitcoin (BTC), Ethereum (ETH) and other assets made all-time highs last week. Solana (SOL) is the only token in the Top 20 trading up this morning.
Crypto Story of the Day
Binance Coin (BNB), the native token of the Binance Smart Chain (BSC), added as much as USD 27 billion to its market cap since Thursday. This morning, BNB had a market cap of USD 35 billion, making it the third largest asset by capitalization.
BNB was launched in a 2017 ICO as an ETH-based token, raising USD 15 million. Since then, the coin has become the native token of the BSC, which was launched in September 2020. BSC offers compatibility with ETH via its support of the ETH Virtual Machine, allowing projects to migrate from ETH to BSC.
The network has seen significant uptick in activity in the past several months. Daily transactions on the network reached an all-time high of 3.2 million on Friday. Total value locked in various smart contracts on BSC, according to defistation.io, also reached an all-time high of USD 7.1 billion on Sunday. As recently as late January, the value of locked capital was USD 260 million.
According to the same site, DeFi venue PancakeSwap has USD 3.3 billion in capital locked and recorded an all-time high volume of USD 782 million on February 17. The venue hasn’t updated its volume metrics since Friday. PancakeSwap’s CAKE token, which had a market cap of USD 54 million at the beginning of January, saw its market cap top USD 2 billion on Friday.
Also on Friday, Binance announced that DeFi platform DODO, built on ETH and BSC, would be added to Launchpool, Binance’s staking services. Users are able to stake BNB, BETH (a representation of ETH on BSC), and BUSD in order to earn DODO tokens, though the highest yield would be achieved using BNB.
Google search data for “binance” shows the term “DODO” as having the greatest increase in comparison to other related searches in the previous 7 days. Binance tweeted twice on Friday, and again on Monday, amidst BNB’s run-up, that it had “temporarily suspended withdrawals of [ETH] and [ETH]-based tokens” due network congestion.
Though transaction fees on ETH are significantly elevated, other trading venues didn’t report difficulty in using the network.
Last week also saw Binance CEO Changpeng Zhao (CZ) promoting BNB via Twitter and criticizing high transaction fees on ETH, writing “Soon, the total value transacted on [BSC] will also surpass ETH.” In a separate post, CZ also dismissed “a conspiracy theory that Binance is deliberately making ETH gas fees high.”
The CEO tweeted about ETH a total of 34 times in the previous week, compared to only once the week prior.
Transaction fees on ETH have caused applications to migrate. For example, Tron has seen an inflow of USDt, accounting for USD 14 billion of the coin’s market cap, compared to ETH’s 20 billion. Furthermore, it costs about USD 30 to make a trade on UniSwap due to fees.
As such, the emergence of a rival network with similar characteristics but faster and cheaper throughput would logically syphon users away from ETH. Having said that, Binance’s CEO also went out of his way to promote BNB and BSC while criticizing ETH. Moreover, the sincerity of halting ETH deposits and withdrawals remains unclear.
It seems unlikely that gains seen by BNB were led by genuine expansion of its fundamental value, rather, they were more a function of Binance’s ability to highlight the growth of its BSC ecosystem. That said, we feel that this episode will likely be revisited due to ETH trading restrictions and the outsized role CZ had in promoting BNB while highlighting ETH’s faults.