BNB, the native token of Binance’s BNB Chain, entered a symmetrical triangle formation on Aug. 10, when it first challenged the downtrend line at $335 resistance. The next five weeks have been a struggle around $280, the exact intersection between the two conflicting rising and falling patterns.
A decision on whether the symmetrical triangle will break to the upside or downside is expected on September 30, when the trend lines cross. The BNB Chain token, which currently boasts a total market capitalization of $45 billion, has outperformed the broader altcoin market by 15% over the past three months.
The latest breakthrough in the development of BNB Chain was announced on September 7, after the project introduced zero-knowledge proof (ZK) scaling privacy technology. The testnet is expected in November, with the goal of achieving faster finality and lower transaction fees. Ethereum mastermind Vitalik Buterin also wants to implement a similar solution for the Ethereum network and highlighted the importance of ZK by the end of 2021.
The Ethereum-supported BNB Chain network is fully functional and hosts decentralized applications (DApps), including decentralized exchanges (DEX), games, collateralized lending services, social media, yield aggregators, and NFT marketplaces.
A decline in price deposits could be a red flag
Despite currently being 60% below its all-time high, BNB remains the third largest cryptocurrency by market cap ranking, excluding stablecoins. Also, the network holds $6.6 billion worth of deposits locked in smart contracts, a term known as total value locked, in the industry.
Even though the price of BNB has risen 26.5% in the last 3 months, the network’s TVL measured in BNB tokens has fallen by 12.5% in the same period. Normally, this would be worrying, but it depends on how other competitors have fared.
In fact, lower smart contract deposits have been the norm across the industry. For example, the TVL of Solana (SOL) was reduced by 27.5% in 3 months, and that of Avalanche (AVAX) by 36%. Even Ethereum saw a 29% cut 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 has gained 12% in the three months to Sept. 16. This figure is much higher than that of other Ethereum competitors, such as Avalanche’s $2.2 billion or Solana’s $1.3 billion, according to data from DeFi Llama.
The use of DApps is on the rise, led by Gameta
To confirm whether BNB Chain’s TVL decline is accompanied by a decline in users, investors should look at decentralized application (DApp) usage metrics.. Some DApps, like games and collectibles, don’t require large deposits, so the TVL metric is irrelevant in those cases.
PancakeSwap, the BNB Chain decentralized exchange, has 1.75 million active addresses and is the absolute leader of all smart contract networks. Meanwhile, the Ethereum network only has three DApps with more than 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. Critics of BNB Chain will have a hard time if another app besides PancakeSwap consolidates its lead in all smart contract networks.
Judging from the absolute figures, i.e. the 12.5% decline in TVL on BNB tokens and the 14% decline in active addresses on the leading Binance Chain DApp, one could incorrectly conclude that the BNB token is poised for a correction.
Nevertheless, More granular analysis, including a comparison with competitors, shows that the symmetrical triangle pattern that was crossed at $280 on Sept. 30 is likely a bullish trigger for BNB price.
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