BNB, the native token of Binance’s BNB chain, entered a symmetrical triangle formation on August 10, when it first faced the falling trendline at the $335 resistance. The next five weeks were a struggle around $280, the exact intersection between the two contradictory ascending and descending patterns.
A decision on the breakout of the symmetric triangle to the upside or downside is expected by September 30, when the trendlines will cross. Currently holding a total market capitalization of $45 billion, the BNB Chain token has outperformed the broader altcoin market by 15% over the past three months.
The latest breakthrough in the development of the BNB channel was announced on September 7, after the introduction of the project proof of zero knowledge (ZK) scaling privacy technology. The testnet is expected in November, aiming for faster finality and lower transaction fees. Ethereum mastermind Vitalik Buterin also wants to implement a similar solution for the Ethereum network and he highlighted the importance of ZK in late 2021.
BNB Chain’s Ethereum-enabled network is fully functional, hosting decentralized applications (DApps), including decentralized exchanges (DEX), games, collateralized lending services, social networks, yield aggregators, and NFT marketplaces.
A fall in the price of deposits could be a red flag
Despite currently being 60% below its all-time high, BNB remains the third-largest cryptocurrency by market capitalization, excluding stablecoins. Additionally, the network holds $6.6 billion in deposits locked to smart contracts, a term known as total value locked, in the industry.
Although the price of BNB has increased by 26.5% over the past 3 months, the network’s TVL measured in BNB tokens has fallen by 12.5% over the same period. Usually this data would be cause for concern, but it depends on how other competitors have fared.
In fact, declining smart contract filings have been the norm in the industry. For example, Solana (SOL)’s TVL decreased by 27.5% in 3 months and Avalanche (AVAX) decreased by 36%. Even Ethereum saw a 29% reduction in ETH deposits, down to 24.2 million from 34 million on July 17.
In dollar terms, BNB Chain’s current TVL of $6.6 billion gained 12% in the three months to September 16. This figure is significantly higher than other Ethereum competitors, such as Avalanche’s $2.2 billion or Solana’s $1.3 billion. according to DeFi Llama data.
DApp usage is on the rise, led by Gameta
To confirm whether the decline in BNB Chain’s TVL is accompanied by a reduction in the number of users, investors should analyze the usage metrics of decentralized applications (DApps). Some DApps, such as games and collectibles, do not require large deposits, so the TVL metric is irrelevant in these cases.
PancakeSwap, BNB Chain’s decentralized exchange, has 1.75 million active addresses and is the absolute leader across all smart contract networks. Meanwhile, the Ethereum network only contains three DApps with over 35,000 active addresses, namely Uniswap, OpeanSea, and MetaMask Swap.
More importantly, three DApps using BNB Chain grew by 190% or more, with Gameta being the most promising, with over 900,000 active addresses. BNB Chain critics will struggle if another app besides PancakeSwap consolidates its leadership across all smart contract networks.
Judging by the absolute numbers, i.e. the 12.5% drop in TVL of BNB tokens and the 14% reduction in active addresses on Binance Chain’s main DApp, one could erroneously conclude that the BNB token is ready for a correction.
However, a more granular analysis, including a comparison with competitors, shows that the crossover of the symmetrical triangle at $280 on September 30 is likely a bullish trigger for the price of BNB.
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