Introduction

Binance is the fastest growing crypto exchange. It was launched less than two months ago (2017/7/14) and it has already seen a huge growth in users and trade amounts. It has more than 120,000 users, and a daily trading volume that is more than $83,000,000.

Binance is a pure-crypto coin, meaning that it does not deal with fiat currencies. This was a very smart move because it saved them so many regulatory troubles. You can read more about their stats and achievements in this short period here. However, I am more interested in something else...

The Coin: BNB

Binance has its own coin: BNB. It is a ERC20 compatible coin. You can use the coin to pay for the exchange fees. If you do that, you would get a 50% discount! Moreover, the team will use 20% of their profits to buy back BNB and burn them. This will cause the supply of BNB to decrease gradually adding value to the coin.

My Analysis

1- The BNB coin can be used for paying fees on Binance platform. You can get a 50% discount if you use it instead of BTC.

2- This is a very big incentive for traders to buy BNB.

3- The number of traders on the platform is increasing exponentially, and so is the amount traded there.

4- This means that there should be a huge demand for BNB, and hence the price should continue to ascend. Unfortunately, it is not. If you follow BNB, you would notice that every time the price goes up, a huge supply enters the market and causes the price to go back down

So, What is the Problem?

5- It is clear that there must be a huge source of supply offsetting the demand.

6- Some people suggested that maybe the dev team are selling their initial coins (80MM coins = 40% of all coins) . However, the CEO has confirmed that they are not, and I believe him.

7- I think I found the source of supply: it is the fees themselves.

8- Binance's income is coming from the fees. right? So, they must be selling them back to the market.

9- If I were in their shoes, I would sell the fees when the price goes up. This can explain why the price of BNB keeps falling each time it has a bull run.

10- The only reason that can push BNB up on the long-run would be their buy-back program I mentioned earlier. However, I don't expect that to have a big impact on the price., especially if you take into consideration that the team will eventually sell their held coins.

Conclusion

If my analysis is correct, then BNB is a great coin for trading, but not for investment because its supply and demand are almost equal, and will continue to be, and hence the price of BNB will continue to fluctuate in a fixed range. Currently it is $2 - $3.

What do you think? Is my reasoning correct?

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Disclaimer: This is my personal opinion. It is not a financial advice. You should not make any investment decision without first consulting your own financial advisor and conducting your own research and due diligence.

Note: I have posted a similar article to this on binance's Reddit, and discussed my theory with community members on their slack channel. No one pointed out a problem in my reasoning.

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