The total market capitalization of cryptocurrencies jumped from $860 billion (June 30) to $1.03 trillion today, a 20% relief in just five weeks. Although Ether (ETH might have been the leader among the largest smart contracts chains, BNB managed 39% growth over the same period.
BNB (blue), vs. BNB (blue) vs. TradingView
BNB token’s year to date performance is still negative by 43%. However, the current $49.5 million market capitalization places it third, after stablecoins. PancakeSwap is the most popular decentralized app (DApp), with 843,630 active addresses over the past seven days. It runs on BNB Chain.
The token is primarily used as a utility asset in the Binance exchange ecosystem. It allows traders to receive discounts and participate in token offers. Technically, the BNB token doesn’t grant any Binance-owned service or company ownership rights, nor dividends.
Bloomberg reports that the United States Securities and Exchange Commission is looking into whether the 2017 initial coin offering (ICO), of BNB tokens consisted of a sale unregistered securities. If buyers plan to make a profit from the efforts made by a company or project that was funded through the capital raise, a digital asset could be subject to scrutiny by the SEC.
Investors should examine network usage, active users, and decentralized application adoption to determine whether BNB’s 39% rise in five weeks is justified.
Mixed data from smart contracts deposits and DApp use
BNB Chain’s primary, decentralized application metric began to show weakness in May when the network’s total valued locked (TVL), fell below 24 million BNB.
BNB Chain network Total value locked, BNB millions Source: Defi Llama
The chart below shows how DApp deposits at BNB Chain saw a 28% decrease in three months, as the indicator reaches its lowest level since April 2021. Comparatively, Ethereum’s TVL is currently at 24.4 million Ethereum, a 11% decrease over the same time period. Another DApp competitor, Solana, saw its TVL drop by 2% to 50.2 millions SOL.
The good news is that the Binance exchange launched its first token on Aug. 3. This token will be used to verify verified user status. Binance Account Bound token (BAB) is a decentralized identity tool that indicates that wallet owner has completed Know Your Customer (KYC), verification on the exchange.
One can analyze DApp usage metrics to confirm that the drop in TVL is alarming. The value of deposited money is not important for some DApps that aren’t financially demanding.
The top seven most-used DApps by BNB Chain in the past seven days. Source: DappRadar
DappRadar data shows that on August 4, the average number of BNB chain network addresses interfacing with decentralized applications increased 17%. SecondLive, which is a metaverse that uses NFT and decentralized finance technologies, was the only negative change.
Additional addresses are not necessary to support increased DApps usage
Active network addresses did not reflect the growing interest in BNB Chain DApps. They peaked at 2.27 Million on Dec. 1, 2021 and have recently averaged slightly more than 900,000.
Addresses of active smart chains in BNB Source: BSCScan
BNB Chain’s TVL was hit the hardest, but there is still solid network usage in Decentralized Finance (DeFi), applications and games. Both MOBOX and Era7: Game of Truth rank among the top 10 DApps on every blockchain covered in DappRadar.
Although the above data suggests that BNB Chain’s TVL is falling behind other chains, investors shouldn’t be worried because DApps activity within the network continues to be strong. There is no reason to be bearish as long as Binance does not face significant obstacles in supporting the BNB Chain.
Risk is inherent in every investment or trading move. Before making any investment or trading move, you should do your research.