BNB (BNB), the native token of cryptocurrency exchange Binance, is under threat of a significant price correction in the coming weeks, based on a mix of technical and fundamental indicators.
BNB Triangle Breakout Continues
From a technical perspective, BNB has entered the breakout stage of its multi-month ascending triangle pattern, a trend continuation indicator. The break could last until the price reaches the level that is the length equal to the maximum height of the triangle.
In other words, the BNB ascending triangle breakout target is near $170, 30% below current price levels, as shown below. The BNB/USD pair could fall to such a level in January 2023.
For now, the BNB breakout move appears to be stalling near $222, which has served as a strong support level in recent history, including the declines witnessed after the Terra (LUNA) collapse in May 2022.
BNB could retest $222 for support, based on a rising wedge technical setup forming on the four-hour chart, as shown below.
BNB shorts gain momentum
The bearish technical setup for BNB receives additional signals from an increasing number of short positions.
In particular, the fall in the price of BNB observed in recent days has coincided with an increase in its open interest (OI), which reached more than USD 415 million on December 18, its highest level since November 2021. The increase of open interest and the price decline suggest that traders have been opening new short positions in the BNB market.
Wick, options trader and analyst, said that BNB could be in “big trouble” if Bitcoin (BTC) falls further. The daily correlation coefficient between BNB and BTC has been mostly positive throughout its history.
“First target is $197,” he tweeted.
Binance Insolvency Fears Drive Exchange Withdrawals
From a fundamental perspective, BNB looks weaker due to the growing legal problems of its parent platform Binance. Binance could face possible criminal charges for money laundering and sanctions violation.
Furthermore, the FTX debacle also created skepticism among investors towards Binance. Many speculate that, like FTX, Binance could have used BNB as collateral for loans. Although Binance has denied such rumors, his clarification has done little to help BNB break its downtrend.
Additionally, growing uncertainty led clients to withdraw $3.6 billion worth of cryptocurrency in a week, according to data revealed by Nansen on Dec. 13. Later, the exchange stopped USD Coin (USDC) withdrawalsa stablecoin backed by rivals Circle and Coinbase, fueling rumors that it could file for insolvency.
On Dec. 14, Binance CEO Changpeng Zhao downplayed insolvency risks by noting that the exchange had seen increased withdrawals during the Terra and FTX crashes, adding that its ability to meet withdrawal requests points to healthy “stress tests.”
“Now the deposits are coming back in,” Zhao said.
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