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BNB (BNB) saw a 12% surge in value in the seven days leading to March 29, hitting a nearly two-week high of $620. The surge narrowed the valuation gap with its biggest competitor, Ether (ETH), which posted a 5% gain in the same timeframe. Nonetheless, mixed signals from on-chain BNB Chain data indicated that the rally might have stretched quite far.

Impact From Spot Bitcoin ETF Flows And DeFi Rally On BNB’s Price

Market analysts note that the crypto market’s upside movement is majorly connected to inflows into spot Bitcoin exchange-traded funds (ETFs), which encountered a setback in the week ending March 23.

For the first time since the launch of spot ETFs in January, the financial instruments recorded a net outflow of $890 million. On the positive side, recent figures show a considerable drop in the outflows from the Grayscale GBTC fund, with just $104 million leaving the fund on March 28.

In the first half of March 2024, BNB’s price surged by 61.7%, but the momentum reversed after it hit a peak of $645, translating to a market capitalization of $96.4 billion. On that note, BNB hit an all-time high valuation of $116 billion in November 2021.

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Notably, the total value locked (TVL) on BNB Chain, which represents the total amount of deposits in the network’s smart contracts, was $15.7 billion at this peak but has since dropped to only $7.1 billion, a 55% drop.

With the latest rally and volatility, short-term investors and day traders are presented with multiple opportunities to earn some income. With BNB rising recently, traders are using tools like Finance Phantom to boost their profits and minimize losses.

It is crucial to note that the whole crypto market, specifically decentralized finance (DeFi), has shrunk massively since late 2021. Thus, it is somehow unfair to focus on the drop in BNB Chain’s TVL. For instance, the total market data for all the blockchains tracked by DeFiLlama, which once hit almost $205 billion, now stands at $155 billion, a 25% drop.

Thus, an extensive examination of BNB Chain’s TVL, mostly when compared to direct competitors like Solana and Ethereum, is highly warranted. In that context, BNB Chain’s smart contract deposits have dropped to their lowest since March 2021, down 10% over two months, contrary to Ethereum’s 8% TVL surge in ETH terms and Solana’s TVL, which spiked 29% since January 28, as reported by DefiLlama.

BNB Chain’s Activity Quite Promising

Total value locked should not be used as the only indicator of a blockchain’s success. Most decentralized applications (dApps), including decentralized bets, games, nonfungible token (NFT) marketplaces, collectibles, and social networks, do not need considerable deposits. In the past week, almost 2 million active addresses were engaging with dApps on the BNB Chain.

BNB Chain’s activity levels compete with those of Ethereum’s most active layer-2 networks, boasting a significant number of active addresses. On that note, despite Solana’s active addresses being 14% higher during the same period, no blockchain other than Ethereum approaches the seven-day trading volume of BNB Chain, which stands at $12.4 billion. Furthermore, while Solana and Ethereum saw their volumes drop, BNB Chain’s trading volume experienced an 11% surge.

Projecting future trends in the crypto industry offers significant challenges. A highly reliable strategy features the keen examination of derivative metrics, including the demand for leverage in BNB perpetual futures contracts, which works as an indicator of market demand. A notable metric to consider is the funding rate, a positive funding rate shows a tendency among the traders to apply leverage to their long positions.

The most recent figures indicate that the demand for leveraged long positions has cooled off, with the 8-hour funding rate holding steady at nearly 0.03% or about 0.6% weekly. Normally, when the traders feel positive about the market, the rate can climb above 1.2% weekly. So, despite BNB’s price struggle with the $620 level, the market sentiment remains optimistic.

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Nathan Ferguson

By Nathan Ferguson

Nathan Ferguson is a talented crypto analyst and writer at Herald Sheets, dedicated to delivering comprehensive news and insights on the ever-evolving digital currency landscape. With a strong background in finance and technology, Nathan's expertise shines through in his well-researched articles and thought-provoking analysis. He holds a degree in Economics from the University of Chicago, and his passion for cryptocurrency drives him to stay up-to-date with the latest industry trends and developments.

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