BNB DApp volumes down 25% in a week — Will BNB price follow?

BNB (BNB), the native token of BNB Chain, gained 4.1% from Oct. 10 to Oct. 11, signaling resilience after briefly testing the $555 support level. BNB price has remained relatively stable since July, even as the broader altcoin market saw a 15.6% decline. This performance has solidified BNB as the third-largest cryptocurrency, with a significant $15 billion market capitalization advantage over Solana (SOL).

Activity in BNB Chain has been falling, and this could spell trouble for BNB price

Ochain activity for BNB Chain dropped by 37% over the past week, raising concerns among investors about the sustainability of the BNB recent outperformance. Traders are wary that Ethereum’s layer-2 scaling solutions are gaining traction, especially following the launch of the Base network, which offers fast and exceptionally low-cost integration with Coinbase, the leading US exchange and Web3 wallet provider.

It could be argued that BNB’s value is partly driven by the offerings of the Binance exchange, including exclusive launchpad access and trading fee discounts, which may reduce the need for BNB usage on the BNB Chain itself. However, beyond network transaction fees, BNB is widely utilized across the ecosystem’s decentralized applications (DApps) for trading, staking, yield farming, real-world assets (RWA), lending, launchpads, gaming, and derivatives markets.

To assess whether activity on the BNB Chain is indeed supporting the BNB price, it is essential to examine onchain deposits and network fees as key indicators.

Presently, BNB Chain’s total value locked (TVL) stands at 8.1 million BNB, showing little change from two months ago. However, network fees dropped to their lowest level in more than four years for the week ending Oct. 7. The accumulated fees of 1,880 BNB for that period mark a significant 56% decrease compared to the previous week.

The decline in fees is primarily driven by a 25% reduction in DApp volumes on BNB Chain, which could be a potential concern for the BNB price outlook. Notable underperformers include PancakeSwap, with a 25% drop in weekly volume, and Uniswap, which saw a 22% decline. In comparison, Ethereum DApps experienced a 9% decrease in volume over the same period, according to DefiLlama, while Solana saw a 15% reduction in onchain activity.

Regarding deposits, Ethereum’s TVL is at 19.2 million ETH, unchanged from two months ago. Meanwhile, Solana’s network TVL has surged to 40.9 million SOL, its highest level in two years, reflecting a 26% increase over the past two months. In essence, BNB Chain’s activity has lagged slightly behind its competitors, which does not support the BNB recent outperformance against the broader altcoin market.

How sustainable is the Binance Launchpad?

Adding to the factors limiting the BNB price upside, there has been significant criticism surrounding Binance’s listing fees. According to Arthur Hayes, co-founder and former CEO of BitMEX, token issuers are reportedly required to buy and hold ~$5 million worth of BNB and give away up to 16% of the token supply.

Ignas, the co-founder of Pink Brains DeFi Creator Studio, suggests that Ethereum layer-2 Scroll could have launched its token through a decentralized launchpool, allocating just 5.5% of the supply for liquidity incentives. This approach could have boosted ecosystem activity and eventually compelled major centralized exchanges (CEXs) to list the token voluntarily. Ignas argues that paid CEX listings rarely create incentives for long-term holding.

Related: Web3 momentum accelerates at Binance Blockchain Week 2024 in Dubai

Amid these criticisms, other market analysts have voiced concerns about the poor performance of recent token launches on Binance. Notably, Hamster Kombat (HMSTR), Catizen (CATI), and DOGS experienced significant negative price action, according to X user ZerebusX, who remarked, “This isn’t the Binance we know, and it’s not what CZ wanted Binance to be.”

Consequently, the outlook for the BNB price is influenced by the subdued activity on BNB Chain and by broader sentiment toward Binance’s exchange services, including its launchpad offerings.