BNB Rises 39% Despite Smart Contract Deposits Falling 28% - Should Investors Worry?

BNB Rises 39% Despite Smart Contract Deposits Falling 28% – Should Investors Worry? – Mail Bonus


The total cryptocurrency market capitalization rose from $860 billion on June 30 to the current $1.03 trillion, a 20.6% relief in five weeks. Ether (ETH) may have been the leader among the largest smart contract chains, but BNB managed to gain 39% during that period.

BNB (blue) vs ether (orange), AVAX (blue), SOL (yellow). Source: TradingView

Year-to-date performance of BNB tokens remains negative by 43%, but the current market cap of $49.5 billion is the third largest, excluding stablecoins. Furthermore, the leading distributed application (DApp) is PancakeSwap – 843,630 active addresses in the past seven days – running on the BNB Chain.

The token primarily serves as a utility asset within the Binance exchange ecosystem, allowing traders to earn discounts or participate in token offers. So technically, the BNB token does not give ownership rights or dividends to any company or service owned by Binance.

However, according to Bloomberg, the US Securities and Exchange Commission (SEC) is investigating whether the initial coin offering (ICO) of BNB tokens in 2017 involved the sale of unlisted securities. A digital asset may come under scrutiny by the SEC if the buyers intend to profit from the efforts of a crowdfunding company or project.

To understand whether BNB’s 39% increase in five weeks is justified, investors should analyze network usage, including smart contract deposits, active users, and decentralized application usage.

Mixed data from smart contract deposits and DApp usage

BNB Chain’s main decentralized application metric started showing weakness earlier in May as the network’s total value locked (TVL) fell below 24 million BNB.

BNB Chainnet Total value locked, BNB millions. Source: Defi Llama

The chart above shows how BNB Chain’s DApp deposits fell by 28% in three months as the indicator reached its lowest level since April 2021. In comparison, Ethereum’s TVL now stands at 24.4 million ETH, which is an 11% decrease over the same period. Moreover, another DApp competitor, Solana (SOL), saw a 2% TVL decrease to 50.2 million SOL.

On the bright side, on August 3, the Binance exchange announced the launch of its first token aimed at certifying verified user status on the platform. The Binance Account Bound (BAB) token is a decentralized identity tool displayed to indicate that the owner of a wallet has passed Know Your Customer (KYC) verification on the exchange.

To confirm whether this decrease in TVL should be of concern, DApp usage metrics should be analyzed. Some DApps are not financially demanding, so the value invested does not matter.

BNB Chain’s most used DApps in seven days. Source: DappRadar

As shown by DappRadar data, on August 4, the number of BNB Chain addresses communicating with decentralized applications increased by 17% on average. The only negative change was SecondLive, a metaverse that uses decentralized finance and NFT technology.

Enhanced use of DApps is not supported by additional addresses

The growing interest in BNB Chain DApps was not reflected in active email addresses, which peaked at 2.27 million on December 1, 2021, and have recently averaged just over 900,000.

Active BNB smart chain addresses. Source: BSCScan

Even though TVL BNB Chain has been the hardest hit by similar smart contract platforms, there is solid internet usage in decentralized finance (DeFi) applications and games. Both Era7: Game of Truth and MOBOX: NFT Farmer are in the top 10 DApps across all blockchains covered by DappRadar.

The above data indicates that TVL BNB Chain is losing ground against competing chains, but investors should not worry because online DApps activity is still strong. As long as the Binance exchange does not face serious obstacles in supporting the BNB chain, there is little reason to be bearish on the BNB token.

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