Is Binance Coin (BNB) a Good Investment (2020 Outlook)
Binance is a quite unique cryptoasset with only a few others out there like it on the market — none of them as good as Binance’s BNB Coin/Token. It’s purpose is much different than traditional cryptocurrencies, so we’ll briefly cover what it’s used for below and what gives it value before getting into the fundamentals and outlook regarding Binance Coin’s future.
To summarize though: We’d say it’s good for people who will be trading and investing through binance, or who do not particularly believe in Defi (Decentralized Finance) and hold the belief that decentralized exchanges simply will not work or gain traction anytime soon.
Personally because we believe decentralized finance and projects like kyber-network will succeed and have more and more integration — and we do not actively trade cryptocurrency anymore and thus don’t benefit from Binance’s reduced fees for token holders — we do not invest in Binance’s Coin (BNB) but instead choose to invest in other cryptocurrencies as we believe their upside potential and risk-adjusted return is likely to be better than Binance’s, particularly in a ex-fiat society (if it ever comes).
What Gives Binance Coin Value?
We’ll keep this short and simple — Binance Coin reduces the exchange fees customers have to pay when trading on Binance’s Exchange. This makes it absolutely essential to buy some of if you buy or trade crypto on Binance’s Exchange — at least if you have substantial amounts to invest/trade and not just a couple hundred dollars due to the minimum buy limits on Binance Coins.
Furthermore, Binance has committed to distributing 20% of the exchanges profits back to the community via “burning” the Binance Coin/Token (BNB). This isn’t an entirely transparent process, as Binance’s financials aren’t public, however it appears to be honestly done. In general this amounts to about 4% of the total supply of BNB being “burned” (destroyed/taken out of circulation forever) on average per year, or 1% per quarter.
The Fundamentals: Could Binance's Coin/Token Last?
While we already covered the fundamentals on what gives Binance’s Coin/Token (BNB) value it’s important to analyze if it’s sustainable in the long-term.
Ultimately this depends on your outlook — Do you believe centralized exchanges will continue for many many years and decentralized exchange systems like Kyber or 0x will not gain traction? If that’s your assumption then Binance Coin definitely has a great future — as they’re likely to remain the biggest and best centralized exchange for the foreseeable future if not forever.
However if you believe that Fiat Currency is fundamentally garbage and it’ll go away, well that greatly hurts the centralized exchange narrative in our view — unless the replacement is not cryptocurrency but rather gold/silver/etc.
Personally we hold the assumption/belief that Centralized exchanges will experience a fantastic boom in the next crypto bull-run in the next couple years, however in the further future (5+ years) we believe centralized exchanges will really be smacked by decentralized exchange integration with hardware wallets and easy interface integrations with software wallets.
Our Outlook: Do We Invest in Binance Coin (BNB) and Is It a Good Investment?
We do not invest in Binance Coin — however we do believe it is a good shorter-term investment and will likely drastically outperform most cryptocurrencies in the shorter-term. But due to our long-term outlook we mentioned above in the fundamental section we choose to invest in decentralized exchange tokens (like kyber network and 0x) and just more general cryptocurrencies such as Dash, Bitcoin, Monero, and of course Ethereum.
If you are into speculating we’d say there’s a good chance at outperforming Bitcoin or Ethereum with Binance’s Coin/Token (BNB) leading into the next crypto bull-run, as the exchange profits for binance will likely skyrocket by 8x -> 12x and thus the coin will skyrocket following it. However, if you choose to invest in Binance’s Coin don’t become deluded and think the absurd prices it gets to (likely $150 -> $600/coin) represents fair-value and not a bubble.
Overall if you trade and invest through Binance’s platform and pay them fees anyway you might as well get the fee discount by holding and paying fees with the token — but we wouldn’t say buying large amounts is investing in the future, but rather more speculating, as ultimately the coin’s value directly correlates with the useage of Binance’s centralized exchange, and at least our outlook on that future, in the long-term, is simply not likely to be positive.
What about Binance's DEX (Decentralized Exchange) that uses Binance Token/Coin?
This is the case — however ultimately it’s not the DEX that’ll power Decentralized Finance or with the biggest backing, partners, or dev-team. It’ll likely be the saving grace that pairs with Binance being a custodian and Securities broker in the future that keep BNB from performing badly in the ultra long-term, however we believe overall there’s better prospects in other cryptocurrencies.
But like we said — Speculating on Binance’s Coin/Token will likely beat out nearly everything in the shorter-term, and don’t get us wrong — we believe it’ll outperform most old boring S&P500 stocks in the longer-term. But that comes with a bit of extra risk and we do not believe it’ll outperform actual cryptocurrencies if they’re adopted as reserve-currency and begin to have real-world usage on a large scale.