BNB (BNB) experienced a significant increase in value, rising by 12% in the seven days leading up to March 29. This surge brought its price to a nearly two-week high of $620. As a result, the valuation gap between BNB and its main competitor, Ether (ETH), narrowed, with ETH only gaining 5% during the same period. However, there are indications from on-chain BNB Chain data that suggest the rally may have gone too far.
The price trend of the cryptocurrency market is closely tied to inflows into spot Bitcoin (BTC) exchange-traded funds (ETFs), which experienced a setback in the week ending March 23. For the first time since the introduction of spot ETFs in January, these financial instruments saw a net outflow of $890 million. On a positive note, recent figures show a significant decrease in outflows from the Grayscale GBTC fund, with only $104 million leaving the fund on March 28.
In the first half of March, BNB experienced a 61.7% price surge. However, this momentum reversed after reaching a peak of $645, with a corresponding market capitalization of $96.4 billion. It’s worth noting that BNB reached an all-time high valuation of $116 billion in November 2021. At that peak, the total value locked (TVL) on BNB Chain, which represents the total deposits in the network’s smart contracts, was $15.7 billion. However, it has since fallen to just $7.1 billion, a reduction of 55%.
It’s important to consider that the entire crypto market, particularly decentralized finance (DeFi), has contracted significantly since late 2021. Therefore, it’s unfair to solely focus on the decline in BNB Chain’s TVL. The total market data for all blockchains tracked by DefiLlama has decreased from nearly $205 billion to $155 billion, marking a 25% decrease.
However, it is still worth examining BNB Chain’s TVL in comparison to direct competitors like Ethereum and Solana (SOL). BNB Chain’s smart contract deposits have reached their lowest point since March 2021, dropping by 10% over two months. In contrast, Ethereum’s TVL has increased by 8% in ETH terms, and Solana’s TVL has jumped by 29% since January 28, according to DefiLlama.
TVL should not be the sole indicator of a blockchain’s success. Many decentralized applications (DApps) on the BNB Chain, including nonfungible token (NFT) marketplaces, games, decentralized bets, collectibles, and social networks, do not require substantial deposits. In the past week alone, nearly 2 million active addresses were engaging with DApps on the BNB Chain. The activity levels on BNB Chain rival those of Ethereum’s most active layer-2 networks, with a comparable number of active addresses. Additionally, BNB Chain’s seven-day trading volume stands at $12.4 billion, surpassing other blockchains except Ethereum. While Solana and Ethereum saw their volumes decrease, BNB Chain’s trading volume experienced an 11% increase.
When forecasting future trends in the cryptocurrency sector, examining derivative metrics, such as the demand for leverage in BNB perpetual futures contracts, can provide valuable insights. A key metric to consider is the funding rate, which indicates traders’ tendency to apply leverage to their long positions. The latest data shows that the demand for leveraged long positions has stabilized, with the 8-hour funding rate holding at around 0.03% or approximately 0.6% weekly. In a positive market sentiment, this rate can climb above 1.2% per week. Despite BNB’s struggle with the $620 level, the market sentiment remains optimistic.
It’s important to note that this article is for general information purposes only and should not be considered legal or investment advice. The opinions expressed are solely those of the author and do not necessarily reflect the views of Cointelegraph.