Binance Coin (BNB) & The Binance Ecosystem
Updated
Hello everyone, in this idea I'm going to go over a brief explanation of the Binance Coin token (BNB), and explain why I think this has the potential to increase in value.
What is Binance?
Binance is the worlds largest cryptocurrency exchange. Binance was founded by Changpeng Zhao, a developer who had previously created high frequency trading software.
1. What is Binance Coin (BNB)?
Binance Coin is the crypto-coin issued by Binance exchange, and trades with the BNB symbol. Binance coin runs on the Ethereum blockchain with ERC 20 standard, and has a strict limit of maximum 200 million BNB tokens.
2. How Is Binance Coin’s Supply Controlled?
Binance held an ICO for BNB (basically the same as a IPO), originally selling 100,000,000 coins to those that wanted to participate. The founding team was allocated 80,000,000 coins and the other 20,000,000 went to initial investors.
3. How Is Binance Coin Distributed?
Each quarter the Binance exchange uses 20% of its profits to buy back BNB. Think of this like a share buy back that a traditional company would engage in. Binance will then destroy these coins (this is called a coin burn), in turn reducing the supply until 100,000,000 BNB remains outstanding. All in all, half of the originally issued coins will be destroyed.
4. Why is this positive for BNB ?
The rules of Supply & Demand tell us that when the demand of an asset outweighs the currently supply, we often see a increase in prices.
In BNB's case, first of all the tokens supply will be lowered over time with the BNB Coin burn described above: almost by half. Cryptocurrencies and Crypto Trading continues to increase in popularity and with Binance positioning itself as the #1 Crypto Exchange Worldwide one can only expect the demand to use BNB Token will increase, because BNB is used to power the Exchange Ecosystem, with features such as fees discount & digitized loaning & staking the growing user base will want to use more & more BNB token to lock in their fee discounts and receive potential rewards.
What does the chart show us ?
I can see two quite obvious formations on the chart which are giving us hints of the potential paths of movement here.
1. Head & Shoulders Pattern
In the Head & Shoulders Pattern price forms 3 distinct peaks after a strong uptrend, the left and right peak should have a similar height (shoulders), the middle peak (head) has to be the highest or this can not be a HS pattern . They should seem triangular in appearance but as long as it fits the main characteristics can still be a valid pattern.
You can click the above image for a further explanation of this pattern.
2. What is General Pattern Failure?
General Pattern Failure occurs when a chart pattern breaks out, fails to hit target, quickly reverses then rejects off that same breakout level back inside the pattern continuing in the opposite direction of the breakout. General pattern failure can also be considered a Liquidity Grab or can be referred to as a “Fake Out” also when it happens more rapidly after the original pattern breakout.
Pictured in the above image, you can clearly see how the price after heading downwards from the Head & Shoulders Pattern, came back inside of the pattern, "failing" it and then proceeding to head upwards from there.
So eventually, if the BNB token were to come back inside this Head & Shoulders Pattern support area, we have the potential for the initial downwards breakout to get rejected and fail. The parallel channel may be giving us a sign that the price is going to head in that direction now.
Learning to trade patterns such as these can provide great opportunities if you understand price action and how to identify the key areas inside the patterns that other traders and investors may be focusing on too, these areas become important psychological levels on the chart & price tends to have strong reactions from these areas.
If you enjoyed the insights you can show your support by commenting & liking - below i have linked 3 other ideas explaining the Head & Shoulders & Inversed version of the pattern for further education.
What is Binance?
Binance is the worlds largest cryptocurrency exchange. Binance was founded by Changpeng Zhao, a developer who had previously created high frequency trading software.
1. What is Binance Coin (BNB)?
Binance Coin is the crypto-coin issued by Binance exchange, and trades with the BNB symbol. Binance coin runs on the Ethereum blockchain with ERC 20 standard, and has a strict limit of maximum 200 million BNB tokens.
2. How Is Binance Coin’s Supply Controlled?
Binance held an ICO for BNB (basically the same as a IPO), originally selling 100,000,000 coins to those that wanted to participate. The founding team was allocated 80,000,000 coins and the other 20,000,000 went to initial investors.
3. How Is Binance Coin Distributed?
Each quarter the Binance exchange uses 20% of its profits to buy back BNB. Think of this like a share buy back that a traditional company would engage in. Binance will then destroy these coins (this is called a coin burn), in turn reducing the supply until 100,000,000 BNB remains outstanding. All in all, half of the originally issued coins will be destroyed.
4. Why is this positive for BNB ?
The rules of Supply & Demand tell us that when the demand of an asset outweighs the currently supply, we often see a increase in prices.
In BNB's case, first of all the tokens supply will be lowered over time with the BNB Coin burn described above: almost by half. Cryptocurrencies and Crypto Trading continues to increase in popularity and with Binance positioning itself as the #1 Crypto Exchange Worldwide one can only expect the demand to use BNB Token will increase, because BNB is used to power the Exchange Ecosystem, with features such as fees discount & digitized loaning & staking the growing user base will want to use more & more BNB token to lock in their fee discounts and receive potential rewards.
What does the chart show us ?
I can see two quite obvious formations on the chart which are giving us hints of the potential paths of movement here.
1. Head & Shoulders Pattern
In the Head & Shoulders Pattern price forms 3 distinct peaks after a strong uptrend, the left and right peak should have a similar height (shoulders), the middle peak (head) has to be the highest or this can not be a HS pattern . They should seem triangular in appearance but as long as it fits the main characteristics can still be a valid pattern.
You can click the above image for a further explanation of this pattern.
2. What is General Pattern Failure?
General Pattern Failure occurs when a chart pattern breaks out, fails to hit target, quickly reverses then rejects off that same breakout level back inside the pattern continuing in the opposite direction of the breakout. General pattern failure can also be considered a Liquidity Grab or can be referred to as a “Fake Out” also when it happens more rapidly after the original pattern breakout.
Pictured in the above image, you can clearly see how the price after heading downwards from the Head & Shoulders Pattern, came back inside of the pattern, "failing" it and then proceeding to head upwards from there.
So eventually, if the BNB token were to come back inside this Head & Shoulders Pattern support area, we have the potential for the initial downwards breakout to get rejected and fail. The parallel channel may be giving us a sign that the price is going to head in that direction now.
Learning to trade patterns such as these can provide great opportunities if you understand price action and how to identify the key areas inside the patterns that other traders and investors may be focusing on too, these areas become important psychological levels on the chart & price tends to have strong reactions from these areas.
If you enjoyed the insights you can show your support by commenting & liking - below i have linked 3 other ideas explaining the Head & Shoulders & Inversed version of the pattern for further education.
Note
See our new idea on BNB:This idea played out to damn well!! Congratulations all!
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