The native cryptocurrency of Binance Smart Chain, Binance Coin (BNB), has been soaring with a huge uptick in transaction volume. BNB is also the native coin on the top digital asset exchange Binance. The coin seems to be closing in on Ethereum (ETH) in the market capitalization charts.
BNB is valued at $87 billion as of April 12 at the price of just below $600. On the other hand, the valuation of Ethereum is hovering around $245 billion, around 2,8 fold bigger than that of the Binance Coin.
Congrats @Binance @cz_binance 😍 pic.twitter.com/vLkdGBnnIt
— Joe Grech (@JoeBGrech) April 12, 2021
The technical momentum of BNB has been quite strong that it shortly exceeded the volume of BTC/USDT pair on Binance. This trend is considerable since USDT is the largest stablecoin in the global market and the BTC/USDT pair is one of the most liquid trading pairs in the cryptocurrency space.
Why Is BNB Exploding This Hard?
Binance Coin has been surging due to the three main reasons: strong technical momentum, a general uptick in the popularity of the Binance Smart Chain, and the gap between BSC and Ethereum projects.
In recent weeks, the cumulative transaction volume on Binance Smart Chain has tripled the total volume recorded on the Ethereum blockchain. Mostly in Southeast Asia, the usage of the Binance Smart Chain has been growing, based on data from Coin98, the largest venture capital company operating in Vietnam that is creating a DeFi ecosystem that targets Asia.
Since the price of BNB was significantly lower than Ethereum until late March, the discrepancy between ETH and BNB might have made BNB a compelling investment option.
Also, there is a growing gap in valuations between the Ethereum DeFi ecosystem and Binance Smart Chain. That scenario is believed to have fueled a big segment of the demand for BSC projects.
That caused the value of the Binance Coin to rapidly surge in the last two weeks while ETH has been relatively stable above $2,000. One reporter who covers crypto news in China, “Wu Blockchain,” explained:
“BNB broke through an astonishing $600, but Ethereum’s Fees fell to its lowest point in a month. Although the transaction volume of BSC is 3x that of Ethereum, the two are not in a competitive relationship. The top 10 addresses of BNB hold more than 88%, and Eth is 20%. The future of Ethereum depends on the upgrade of EIP-1559 and 2.0. The only two things Binance needs to worry about are the government suppression and hackers.”
Traders predict that BNB will undergo a more explosive rally in the near term if it manages to break out against Bitcoin. Another pseudonymous cryptocurrency trader, Kaleo, said:
“$BNB breaking above this level on the $BTC pair could lead to the type of explosive momentum needed to actually close in on $1,000.”
Will Capital Flow Back Into Ethereum?
Nonetheless, the managing partner at Spartan Group, Kelvin Koh, said that for now, he believes that the capital will shift back into Ethereum as BSC projects near the valuation of Ethereum equivalents. Spartan Group is one of the biggest DeFi-focused funds in Asia.
Koh insisted that there is a big valuation gap between BSC and ETH projects. The gap may be making BSC projects compelling to the market. He stated:
“BSC is having its own DeFi summer….so much alpha to be discovered in BSC ($XVS, $CAKE). If you are wondering why Ethereum DeFi coins are lacklustre, its because of the huge valuation gap that still exists between the BSC coins and ETH equivalents. Until this gap closes, money isn’t rotating back to ETH DeFi coins.”
