Further to my last post about buying riskier crypto assets, one of the assets on my watchlist was Binance Coin (BNB). This post is about how and why to buy Binance (BNB).
How did I hear about Binance (BNB)?
I first used Binance, the exchange, when I bought some Verge (XVG). I really enjoyed how easy it was get setup and how easy it was to trade on there, so I had a positive impression of the brand itself.
One of the heavily promoted (in terms of visual positioning on the Binance site was the BNB/BTC trading pair. I looked up BNB on coinmarketcap.com and it’s been steadily chunking out significant price rises in recent weeks. So I decided to look into this further.
Where do I think that the Binance (BNB) price could get to?
Check out this screenshot from coinmarketcap.com taken at 12.45pm UK time on 6th January 2018:
That’s a market cap of USD 1.6bn, with a circulating supply of 99m BNB with a total supply of 199m BNB, a current price of USD 16.87.
What’s going to drive the price?
We know that price is a function of supply and demand, and for price appreciation, it’s about limiting supply and increasing demand.
Demand will increase because:
Binance itself is an ever increasingly popular crypto-exchange making general exposure to Binance (BNB) ever greater
- It’s popular because it’s an easy way to swap between altcoins and it lists ever more exotic coins.
- Plus you don’t need to provide verification documents unless you want to withdraw more than 2 BTC within a 24hr period.
There is also a solid use case for Binance (BNB)
Actual use cases for crypto coins/tokens/projects are few and far between. An actual use case gets lost in the frenzy for speculation. However, Binance (BNB) has a solid use case, namely that if you use it to pay for commissions when trading on the Binance exchange, you get a 50% discount on the fees you pay. A 50% discount! Why wouldn’t you look into owning a few? (This will reduce in subsequent years of the exchange’s life. See more details here) And why when you own a few, would you let any go outside of paying for trading fees on Binance? In which case, demand isn’t going down, it’s actually going up. You also get a discount on ICOs offered through Binance.
Supply will reduce because:
Binance is buying back Binance (BNB) with profits generated by its exchange. Then it burns (destroys) those buy backs. This is similar to when a company buys back and cancels its shares. This act literally limits supply. In fact, it will reduce supply.
From this article on their website, Binance will:
In accordance with our whitepaper, each quarter, we will use 20% of our profits to buy back and burn BNB, until 100MM BNB are burned. We will buy back and burn 986,000 BNB in 2017 Fall based on our profits in this quarter.
So how did I get to 2,000% upside from here? Here’s the maths:
So if the total supply above is 199m BNB, and if Binance is successful and able to burn 100m BNB, then the total supply of Binance (BNB) will literally be halved. If demand stays constant as is, then this will double the current price of Binance (BNB).
Let’s try and speculate on potential upside using relative/comparative market caps.
Bitcoin’s (BTC) current market cap is USD 283 billion and ranked number 1 on Coinmarketcap.com.
Ripple’s (XRP) current market cap is USD 123 billion and ranked number 2 on Coinmarketcap.com.
Ethereum’s (ETH) current market cap is USD 100 billion and ranked number 3 on Coinmarketcap.com.
Binance (BNB)’s current market cap is USD 1.6 billion and ranked number 29 on Coinmarketcap.com.
Based on all of the above reasoning, it’s completely feasible that Binance (BNB) could get to 10x its current market cap in 2018 without a full ‘buyback-and-burn’.
With the full ‘buyback-and-burn’, this would double (as explained above).
So we get a conservative 2,000%. (10x is 1,000%).
From the current price of about USD 17, that makes a price target of about USD 350.
How to buy Binance (BNB)
Log into your Binance account or open up an account if you haven’t got one.
Using existing funds (other cryptocurrencies), look at the relevant BNB trading pair. (If you don’t have any funds deposited on the exchange to use, deposit some first. I use Bitcoin as my go-to currency to trade/swap into other cryptos, and I’ll use Bitcoin (BTC) in this explanation.
Here’s the trading screen:
Go to the Buy BNB box and click into the Amount field. This will reveal how much BNB you could buy:
You can see that I have 0.02073007 BTC available in my account and that I could use this to buy a maximum amount of 18.47 BNB. (This amount of BNB could have been more or less depending on how much BTC I had in my account (or whatever cryptocurrency you were using to trade into BNB))
Now simply, hit ‘Buy BNB’ and you’ve put in an order to buy Binance (BNB).
Go to your Open Orders at the top of the screen:
And very soon, this trade will have settled – i.e. you will have some Binance (BNB)! You can check this in your Trade History tab.
Here’s my current balance of BNB (I will add to this soon):
I got a lot of value from reading the following articles. Check them out:
Here’s the official Binance site (this link has a referral bonus for me in that if you use it, I get 50% of any trading fees from any trades you make. But don’t worry, you don’t have to use the link – I won’t be offended!)
This blog, Adventures In Crypto, and its contents are for informational and entertainment purposes only and should NOT be construed as investment advice. Always consult a licensed investment professional before making important investment decisions. The opinions expressed here are those of its writer Edmond Chan and he shall NOT be liable for losses resulting from investment decisions based on information or viewpoints presented on Adventures In Crypto.
What do you think of the prospects for Binance (BNB)? Do you agree with the reasoning above? Let me know in the comments below!