Binance Coin Up 20% on DeFi IEO Hype; Pullback Ahead?
- Binance’s native token BNB surged by more than 20 percent after its CEO Changpeng Zhao announced his plans to launch an in-house decentralized finance product.
- The BNB/USD exchange rate on Sunday established its quarter-to-date high at $22.94.
- It is now looking to extend its upside momentum towards $27, according to many crypto-analysts.
BNB, the native token of the world’s leading cryptocurrency exchange, Binance, has surged by more than 20 percent following July 24, 2020.
It is the same date on which Binance’s CEO, Changpeng Zhao, announced that they would launch an initial exchange offering round to fund their upcoming decentralized finance project. An Initial Exchange Offering (or IEO), allows startups to raise funds by selling their utility/security tokens at an exchange.
— CZ Binance (@cz_binance) July 24, 2020
Meanwhile, decentralized finance (or DeFi) tends to recreate traditional financial instruments, such as lending and staking, in a distributed architecture.
Mr. Zhao’s declaration appeared at the time when tokens backed by a plethora of DeFi projects were logging stunning price gains. Chainlink, a decentralized oracle network, for instance, saw its native asset, LINK, surge by more than 80 percent in the running quarter.
The announcement also surfaced almost a week after Binance underwent its 12th token burn event. On July 20, the exchange destroyed 3,477,388 BNB, equivalent to US$60.5 million at that time, thereby permanently removing them from circulation.
That also increased BNB’s bullish prospects based on the classic demand-supply dynamics.
Between July 20 until this time of writing, the BNB/USD exchange rate has surged roughly by 25 percent.
BNB is trading 62 percent higher YTD on Monday. Source: TradingView.com
The pair’s upside also took it above a crucial technical resistance, as shown via a red descending trendline in the chart above. The falling slope kept BNB from establishing a full-fledged breakout to the north. But with it now broken, the cryptocurrency’s ability to continue its bull run increased.
At least that is what hardcore BNB traders say. One of them stated that BNB could extend its uptrend towards $25, a level it last tested in August 2020. The others even projected the cryptocurrency at its all-time high valuation of $43.
Their reasons were straightforward: a DeFi IEO, combined with the token burn events, should push BNB to higher price levels.
“Within 7 days, it will be time to FOMO into $BNB if you haven’t already,” said one trader on August 1. “New DeFi IEO + launchpad 2.0. Add in the bullish market on the largest exchange, and not much math required. Exchange token number go up.”
Binance Coin, on a technical perimeter known as the Relative Strength Index (RSI), stands overbought. Assets whose RSI readings go above 70 tend to correct lower to neutralize their overall sentiment.
Therefore, it is likely for BNB to face higher selling pressure near the normal resistance levels, starting at $23.85. If price moves above the said level, then the asset would face a similar corrective pressure at $27.51.