The recent rally of the BNB cryptocurrency has been impressive, with its price surging past $700. However, whether this rally can be sustained in the long run is a question that many investors are asking.
On-chain activity:
One key factor to consider is on-chain activity, which refers to the number of transactions taking place on the BNB Chain. The article on cointelegraph.com says that BNB Chain activity shows strength, but not enough to justify further price gains. There is a 23% surge in volumes over the past seven days, while almost every other competing blockchain experienced a contraction. This suggests that BNB may be attracting more users than its competitors. However, the article also points out that BNB Chain’s relatively stable active addresses engaging with its DApps raises some questions about the effective growth in the number of users. This means that while the total number of transactions is increasing, the number of individual users participating in the network might not be growing at the same pace.
Derivatives data:
Another factor to consider is derivatives data, which can provide insights into investor sentiment and leverage levels. The article says that BNB futures open interest breaks above $1 billion, but there is no evidence that excessive leverage using BNB futures triggered the recent rally above $710. Futures data does not provide an indication of whether more leverage is being demanded from buyers or sellers. Perpetual futures, also known as inverse swaps, incorporate an embedded rate recalculated every eight hours to compensate for leverage demand imbalances. A positive rate indicates a preference for leverage being utilized by buyers. The current 0.2% weekly funding rate for BNB is in line with Bitcoin (BTC) and lower than SOL, which is presently at 0.5%. This suggests that investors are not using excessive leverage to buy BNB, which is a positive sign for the sustainability of the rally.
Competition from Solana (SOL):
Competition from other blockchains, such as Solana (SOL), is also an important factor to consider. The article discusses that BNB has a 37% market capitalization premium over Solana. However, Solana is distant from BNB in terms of DApps volume. While BNB Chain activity has surged 23% in the past seven days, Solana has experienced a contraction. This suggests that BNB may be growing its user base more effectively than Solana. However, it’s important to note that BNB Chain’s total seven-day volume is 85% lower than Ethereum’s. This means that Ethereum is still the dominant player in terms of overall blockchain usage.
In conclusion, there are both positive and negative signs for the sustainability of the BNB rally. On-chain activity is strong, but the growth in the number of users might not be as impressive as the surge in transaction volumes. Derivatives data suggests that investors are not using excessive leverage, which is a positive sign. However, competition from other blockchains, such as Solana, remains a challenge. Overall, the future of the BNB rally remains uncertain, and investors should carefully consider all of these factors before making any investment decisions.
This information is not legal advice. Do your own research before making any decisions. Only invest what you can afford to lose and seek independent financial advice if needed. Understand the risks involved before purchasing any cryptoasset