Binance Exchange Token’s Struggle Amidst Crypto Rally Records

An uphill battle awaits Binance's exchange token amid a record-breaking cryptocurrency rally

The majority of the recent surge in digital assets has not been reflected in Binance's BNB token, indicating a difficult future ahead for the biggest cryptocurrency exchange following its guilty plea to US charges and a $4.3 billion fine. Fueled by a surge in Bitcoin, the total market value of cryptocurrencies has increased by almost 12%, or $180 billion, during the last seven days, according to CoinGecko data. As of 2:55 p.m. on Thursday in New York, BNB had gained roughly 1.3% during that time and was trading at US$231.

BNB is thought to be an indication of attitude toward the exchange and provides holders with benefits including reduced trading fees on Binance. This year, the platform was the subject of numerous regulatory investigations, which culminated in guilty pleas for anti-money-laundering and sanctions violations in the US on November 21. Bloomberg's research indicates that BNB is the only significant coin that has not experienced a gain in value thus far this year. Although Binance is still by far the largest marketplace for buying and selling cryptocurrency derivatives as well as digital assets, its hegemony is beginning to erode. According to CCData, the exchange's percentage of spot trade volumes fell from 55% at the beginning of 2023 to 32% in November. Its market share in derivatives fell from almost 60% to 48%.

According to Matthew Sigel, head of digital-assets research at investment manager VanEck, "we expect Binance will lose its throne as the No. 1 centralized exchange by volumes" in the wake of the plea agreement with FBI. The top rank might be taken by competitors OKX, Bybit, Coinbase, and Bitget, he continued. As part of the deal with US authorities, Binance's founder, Changpeng Zhao, also entered a guilty plea and resigned as the company's CEO. Richard Teng, a former government employee who now works in the cryptocurrency industry, will take over as CEO Zhao's replacement. He has the difficult job of turning the company around so that regulatory fallout may be avoided while still protecting market dominance.

In an interview conducted last month, Teng attempted to convey the company's strength by stating that revenues and earnings are still high at Binance. He is under pressure to name a board of directors, choose a formal headquarters, and increase the company's financial transparency.

Trade Movements

A request for comment regarding BNB's performance and the company's business prospects was not answered by Binance. DefiLlama data shows that customers withdrew a net $1.6 billion from Binance in November, the second-highest monthly outflow of the year. A portion of that has changed, with $398 million total coming onto the exchange in December.

Since the US guilty pleas and more than US$4 billion fine—among the largest in US history—BNB has decreased by roughly 8%. During the same time frame, an index of the top 100 digital assets increased by about 14%. According to Clara Medalie, director of research at Kaiko, "BNB is being treated as a proxy for Binance right now, which explains its strong underperformance."

Longer time horizons have seen BNB outperform; for example, within the last three years, it has increased by roughly 686% while the index of the top 100 tokens has increased by 122%. Binance is benefiting from the resurgence in digital asset prices this year following a 2022 decline. Hopes that the worst of the US crackdown on cryptocurrencies may have passed have also been stoked by the plea agreement and Sam Bankman-convicted Fried's fraud at FTX.

Although "Binance remains operational and there's at least a path forward," according to Annabelle Huang, managing partner at cryptocurrency lender Amber Group, "the US settlement certainly had an impact on the BNB price."