Shortly after it launched in 2017, the Binance exchange created its own cryptocurrency called Binance Coin (BNB). At that time, Binance was a newcomer compared to other exchanges and its signature crypto was dirt cheap.
Things have changed quite a bit since then. Binance is now the world's largest crypto exchange, dwarfing the competition in terms of trading volume and weekly site visits. Binance Coin has climbed the charts and is the fourth-biggest crypto by market cap at the time of this writing.
Let's find out what a timely Binance Coin investment would be worth now, along with what the coin does and its current outlook.
The growth of Binance Coin
Binance Coin started with an initial coin offering (ICO) where it could be purchased using Bitcoin or Ethereum. Its earliest recorded cash price on CoinMarketCap comes on July 25, 2017, when it was available for as little as $0.10. If you had bought $1,000 worth, you would have gotten 10,000 BNB.
The current price of Binance Coin is $290.57. Your investment would now be worth over $2.9 million.
That's a jaw dropping number, and it's not even the best you could've done. When Binance Coin hit its all-time high of $690.93 on May 10, 2021, 10,000 BNB were worth nearly $7 million.
How Binance Coin is used
Binance Coin is the native cryptocurrency for Binance. You can buy it, sell it, and trade it for other cryptocurrencies. Those are things you can do with just about any crypto, but what makes Binance Coin special is the Binance Smart Chain (BSC).
Here's how BSC works:
- It's a programmable blockchain that developers can use to build their own projects.
- It's able to run smart contracts, which are self-executing contracts created using code.
- One of its main uses is decentralized finance (DeFi) applications. These applications, which have rapidly grown in popularity, aim to offer an alternative to traditional financial products. For example, there are DeFi platforms for borrowing and lending crypto.
- It's compatible with the Ethereum Virtual Machine, making it easy to bring over projects built on Ethereum.
- Transaction fees, which are called gas fees, are paid in Binance Coin.
That final point is why the success of BSC ties in to the success of Binance Coin. If you use apps built on BSC, you need Binance Coin to pay the gas fees. The more people who use those apps, the more demand there will be for Binance Coin.
Since BSC only launched in September 2020, it's much newer than Ethereum, its biggest competitor. However, it has been gaining on Ethereum because it offers faster and cheaper transactions.
Gas fees are much higher on Ethereum than they are on BSC, and transactions take much longer. Ethereum is rolling out upgrades to a new version, Ethereum 2.0, that should solve both problems. But for now, BSC is more efficient. That bodes well for both Binance and Binance Coin.
Is Binance Coin a smart investment?
Considering the popularity of Binance and the BSC, Binance Coin could continue to grow. There are also reasons to be cautious about it.
- Competition: The BSC has several competitors that could cut into its market share. Ethereum is the biggest, and its upgrades could erase BSC's main advantages. Other players include Cardano (ADA) and Polkadot (DOT). The Binance exchange has strong competition from several cryptocurrency exchanges as well, especially in the United States.
- Regulation: DeFi is like the Wild Wild West right now. Regulators haven't been able to crack down yet, but that will likely change, and it could limit the BSC's growth.
- Legal issues: Although Binance is the largest crypto exchange, not everything has been smooth sailing. The original version of Binance is banned in the United States, and the exchange had to create a new exchange (Binance.US) to comply with U.S. laws. The Department of Justice and the IRS are investigating Binance for money laundering and tax evasion. Binance has also faced problems in the United Kingdom, Canada, and Japan.
In addition, there's the risk that comes with investing in any cryptocurrency: They're highly volatile and haven't been around long. Binance Coin is four years old, and after a strong start to 2021, it lost 60% of its value in less than two months. If you do invest, you shouldn't put in more money than you can afford to lose.
The price drop could make this a good buying opportunity if you think Binance Coin will bounce back. Ultimately, it depends on what you think the long-term potential is for Binance, Binance Coin, and BSC.
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Lyle Daly owns Bitcoin, Binance Coin, Ethereum, and Cardano.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. Lyle Daly owns shares of Binance Coin, Bitcoin, and Ethereum. The Motley Fool owns shares of and recommends Bitcoin. The Motley Fool recommends Discover Financial Services. The Motley Fool has a disclosure policy.
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