Binance Coin is a leading cryptocurrency with a market cap of over $52 billion. It is the native token for BNB Chain, formerly known as Binance Smart Chain (BSc). Further, the coin is used widely in the Binance ecosystem, which is one of the biggest in the cryptocurrency industry.
Like other digital currencies, Binance Coin had a difficult performance in the first part of the year. It dropped from its all-time high of $672 to a low of $184. Recently, however, the coin has made a spectacular recovery and risen to the highest level in two months.
Why BNB dropped in 2022
There are several reasons why the BNB price dropped sharply in 2022.
First, the decline was part of profit-taking since the coin had a spectacular performance in 2021. At the time, it managed to move from below $5 to an all-time high of $672. In most cases, investors tend to exit an asset after realizing substantial gains. Considering BNB is a native asset to the Binance Smart Chain, it made it easy for investors to buy Binance Coin and dump it when the price was high.
Second, the decline was mostly because of the changing macro environment as inflation soared and the Federal Reserve became extremely hawkish. US inflation skyrocketed to the highest level in over 40 years.
As a result, between January and August, the Fed hiked interest rates by a whopping 225 basis points. It also ended its expansive quantitative easing (QE) policy and embarked on quantitative tightening (QT). Historically, risky assets like cryptocurrencies tend to underperform the market when the Fed is in an aggressive tone.
Third, the BNB price dropped sharply because of the turmoil that happened following the crash of Terra and its ecosystem. Terra, which was a top-ten cryptocurrency, crashed hard after its stablecoin, UST, lost its peg. As a result, there were fears of a contagion in the industry.
Most importantly, volume in the Binance ecosystem declined sharply, leading to lower demand for the coin. Also, the key industries it supports like Decentralized Finance (DeFi) and non-fungible tokens (NFT) went through a turmoil.
BNB is rebounding
After months of tumbling, BNB prices started rebounding in June. This rebound coincided with the overall recovery of America’s stock market. In the past few weeks, the tech-heavy Nasdaq 100 index has managed to move to a bull market.
Further, the BNB Chain ecosystem has continued doing well. For example, the total value locked (TVL) in its DeFi ecosystem has rebounded to over $5.9 billion. This performance was helped by top DeFi projects like PancakeSwap, Venus, Alpaca Finance, and Coinwind among others.
BNB’s non-fungible token (NFT) marketplace also did well. According to CryptoSlam, BNB is the fifth biggest NFT platform after Ethereum, Solana, Flow, and Immutable X. While the total volume of NFTs has dropped recently, analysts believe that BNB will continue having a market share in the sector.
Further, investors believe that the worst in the crypto industry is now behind us. For one, the prices of most cryptocurrencies and tech stocks have started rebounding. The view among most bulls is that the recent decline was part of the cycle that cryptocurrencies go through all the time.
Meanwhile, Ethereum has led the crypto recovery due to the upcoming merge event. Indeed, ETH managed to recover from the year-to-date low of below $800 to over $2,000. As such, this is part of the correlation that exists in the crypto industry.
BNB price prediction
The daily chart shows that the BNB price has made a strong recovery in the past few weeks. The coin has moved above the 25-day and 50-day moving averages. Indeed, the two averages have already made a bullish crossover or a mini golden cross pattern. Additionally, the pair has formed an inverted head and shoulders pattern, which is usually a bullish sign.
The Relative Strength Index (RSI) and the MACD have continued their recovery. It has also moved above the 23.6% Fibonacci Retracement level. Therefore, the coin will likely continue rising as bulls target the next key resistance point at $432, which is along the 50% retracement point.
Summary
The BNB price has made a spectacular recovery in the past few months. This performance has coincided with the overall movement of the fear and greed index, which has moved from extreme fear to greed. The CBOE VIX index has also moved to the lowest level in months. Therefore, the coin will likely continue rising in the next few months.
However, there are potential risks. First, a major hack can have a major implication in the industry. Second, there are still regulatory risks in the crypto industry. Further, there is a possibility that this recovery is a bear market rally.