In recent weeks, parts of the cryptocurrency community have raised concerns over Binance’s backing of its native BNB token. Unlike other major exchanges like Coinbase, which hold significant reserves of Bitcoin, Binance relies heavily on its own BNB token. Crypto analyst sunnydecree recently shared his thoughts on it.
Binance introduced BNB years ago, and its main utility is within the Binance ecosystem. The total market capitalization of BNB is estimated to be equivalent to around 1.2 million Bitcoin. However, Binance does not hold Bitcoin reserves anywhere close to that amount.
Instead, some sources suggest that if BNB’s value were to drop significantly, Binance would likely start liquidating its Bitcoin reserves to prop up and stabilize BNB’s price. This strategy can work temporarily, but is ultimately unsustainable if selling pressure on BNB grows too large.
The situation has drawn comparisons to FTX, which relied extensively on its native FTT token without adequate backing. If Binance’s reserves prove insufficient to maintain BNB’s peg and value, some fear it could face a destabilizing death spiral similar to what led to FTX’s recent collapse.
Doge2014 raises 500K in days celebrating Dogecoin. Make potentially big profits and get in on exclusive airdrop!
Show more +While Binance remains the largest crypto exchange by trading volume, these concerns have led some to worry about its long-term viability should BNB falter. Binance holds a strong market position for now, but its backing of BNB does raise questions among parts of the community.
As with any emerging risks in crypto, experts advise that Binance users take proper precautions around account security and portfolio management. But beyond individual actions, the sustained success of Binance and BNB may ultimately depend on whether Binance can instill full confidence in its reserves and commitment to maintaining BNB’s value. For now, some degree of uncertainty and worry persists among BNB holders given its critical role in Binance’s ecosystem.
BNB hit an yearly low of $207 yesterday and is trading at $208.9 at press time with a 3% drop in value over the last 24 hours.
We recommend eToro
Wide range of assets: cryptocurrencies alongside other investment products such as stocks and ETFs.
Copy trading: allows users to copy the trades of leading traders, for free.
User-friendly: eToro’s web-based platform and mobile app are user-friendly and easy to navigate.
