Binance Smart Chain Centralization Levels Spell Trouble For It's Native Token
Crypto Briefing | Apr 13, 2021 12:58AM ET
Binance has managed to capture the market's attention after the spike in Binance Smart Chain's popularity and BNB's explosive price action. Speculation mounts around Binance as some believe it could become the world’s leading settlement layer. However, new research reveals high centralization levels in Binance Smart Chain, which might affect BNB’s price action. Binance’s native token, BNB, has enjoyed an impressive bull rally since the beginning of the year. The utility token has posted year-to-date returns of over 1,600%, going from $37.40 to a new all-time high of $640.50.
The upward price action allowed it to become one of the top-performing cryptocurrencies in Q1 2021
As speculation mounts, large investors have been adding more tokens to their portfolios. On-chain data shows that a significant number of addresses with millions of dollars in BNB, colloquially known as “whales,” have joined the network over the past two months.
Roughly ten new addresses holding 100,000 to 1,000,000 BNB have been created since early February, representing a 33.33% increase in that period.
The rising number of Binance Coin whales may seem insignificant at first glance. However, seeing as these whales hold between $60 million and $600 million in BNB, the sudden spike in buying pressure could translate into millions of dollars.
The increasing demand for Binance Coin has been fueled by the , making some industry leaders believe this protocol will become the world’s main settlement layer.
Despite the hype around BNB, a recent report reveals high centralization levels among the 21 BSC validators.
Get The News You Want
According to Ryan Watkins, senior research analyst at Messari, each BSC validator seems to be “some way connected or tied to Binance.” The way every new block is produced shows that validators take turns in a “seemingly predefined order.”
Such behavior leads Watkins to believe that there isn’t any “stake-weighted mechanism” running on the Binance protocol.
“The reason why BSC is faster and more scalable is not because of some magical technological innovation. No, it’s instead the magic of centralization. BSC is an Ethereum fork with a centralized validator set. That’s it. Nothing more,” Watkins.
Even though cheap and faster transactions have made BSC undoubtedly preferable, the lack of censorship resistance may come at a higher cost.
h2 Technicals Spell Trouble/h2Binance Coin seems to be preparing for a retracement following its recent rise to new all-time highs.
The Tom DeMark (TD) Sequential indicator currently presents sell signals in the form of green nine candlesticks on BNB’s 1-day, 12-hour, and 4-hour chart. The emergence of these bearish formations across multiple timeframes is quite pessimistic for this cryptocurrency’s near-term price action.
If validated, Binance Coin could enter a one to four daily candlesticks correction before the uptrend resumes. Breaking below the $540 support level could push the utility token toward the next interest areas at $450 or $380.
Given the substantial increase in upward pressure that BNB has seen over the last few months, the bullish outlook cannot be disregarded.
Slicing through the recent high of $640.50 may generate FOMO among market participants, pushing prices to $750 or even $800.
Original Post
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.