Just in: Binance Chain Burns Nearly $405 Million Worth of BNB Tokens
- The BNB burns represent part of an automated system to ensure that BNB’s supply circulation doesn’t exceed 100 million.
Binance’s move to reduce the supplication circulation of its native token (BNB) has since implemented a quarterly burn mechanism. On Wednesday, data from the BNB chain showed a burn of nearly 2 million BNB tokens valued at about $405 million. The popular crypto exchange confirmed the burn via a post on its blog.
BNB Burn and Price Action
Burning is a crypto term that reduces the supply circulation of specific tokens. With the decrease in supply, the value of such tokens goes up. Hence, Binance expects a rise in the value of BNB as it implements this token burn process. The BNB chain ecosystem operates through BNB. Also, it is the currency of the BNB smart chain and BNB beacon chain.
The Binance crypto exchange launched the BNB token following an initial coin offering five years ago. The exchange has automated this burn system to reduce BNB’s total supply to 100 million. The automated burn system uses BNB’s price to determine the amount of BNB to be burned.
This mechanism also uses the number of blocks produced per quarter on the BNB smart chain (BSC). BNB’s current supply circulation is 163 million, while its price is $224 according to current Coinmarketcap data.
BNB has gained 10 percent since the start of this week. However, it failed to reach the price corresponding to the 50-day Simple Moving Average (SMA). Hence, it dropped below the 20-day Exponential Moving Average (EMA). If it fails to rise above the 20-day EMA, the BNB price could fall to the $211 support region.
Technical indicators for the BNB indicate short-term bearish sentiment. The 24-hour EMAs and SMAs show sell signals. Its relative strength index (RSI) is currently 43.8. A digital asset is in an oversold or overvalued region when its RSI is 30 or below. However, it is in the overvalued or overbought territory when its RSI is 70 and above.
Burning History
Binance usually destroys some of its BNB tokens every quarter through a specific process. Under this process, Binance purchases certain amounts of BNB tokens from the market and destroys them. It performed the first burn in October 2017 by burning 986,000 BNB tokens.
Binance uses part of its profits to perform these quarterly burns. Also, there is always an advanced announcement before the burn takes place. Before today’s burn, Binance had burned a total of 1.8 million BNB tokens.
Last November, the exchange introduced the BEP-95. The bep-95 is the implementation of an auto-burn mechanism for BNB tokens. Binance stated that the auto-burn mechanism is more transparent and predictable than the previous burn mechanism.
The Binance team claims that the auto-burn will protect BNB’s price from substantial price swings. It is worth noting that there hasn’t been any massive improvement in BNB price following the implementation of the auto-burn mechanism. BNB’s price has dropped 56 percent of its value since the start of the year.
Rebecca is a Senior Staff Writer at BitcoinWisdom, working hard to bring you the latest breaking news in the cryptocurrency market. In the words of Elon Musk “Buy stock in several companies that make products & services that *you* believe in. Only sell if you think their products & services are trending worse. Don’t panic when the market does. This will serve you well in the long-term.”
