The Binance Coin or BNB, a virtual currency native to the blockchain of the same name and created by the largest cryptocurrency firm in the world, is about to have its own “halving.”
The asset, which is used to pay commissions on the Binance networka crucial event is approaching that can significantly impact the price: the quarterly burning of cryptocurrency.
This mechanism, implemented by the Binance exchange, consists of permanently removing a certain amount of BNB tokens from circulation, to reduce the supply and increase their value. Thus, an effect similar to the Bitcoin halving is expected, only that its “burning” date or amount are not programmed by code.
BNB: what will happen to its price
Estimates indicate that more than 1.6 million BNB will be burned, almost $1 billion. This will be the 28th quarterly burn in the history of BNB. “It is expected to take place in July, following the usual pattern of execution the month after the end of each quarter,” analyst Felipe Avico told iProUP.
The amount of BNB to burn is determined by a mechanism called BNB Auto-Burn, which adjusts the figure based on the price of the token. Due to the recent increase in its value, which reached a historical peak of US$720 in June, the amount eliminated is expected to be lower compared to the previous quarter.
“Quarterly BNB burns reduce the available supply of tokens in circulationwhich, in theory, will generate a increase in price“, he comments to iProUP Norberto Giudice, known on IG as @criptonorber and on X as @npgiudice.
Analysts Believe Burning May Boost BNB Price by Increasing Scarcity
With fewer tokens available, demand can increase, boosting their value. The BNB network is similar to that of Ethereum: it has smart contracts, with decentralized applications that require the token to pay commissions or “gas” for its use.
Precisely, BNB also cuts these charges. “A fixed portion of the gas fees generated by each block processed on the BNB Chain network is allocated to the permanent burning of tokens. It is something that the validators of the network do, in a similar way to what happens in Ethereum,” explains Avico.
To date, 54.4 million BNB have been burned, a third of the nearly 150 million in circulation. The token is worth $570,150 below its recent all-time high, so it has room to grow 20%.
“Binance’s Widespread Adoption of BNB and efforts to comply with regulations can contribute to a new boost in its price“, confides to iProUP Pedro Rey, founder of crypto La Plata and CriptoEducador since 2017.
Furthermore, a possible breakout of the consolidation pattern held by Bitcoin (BTC) In these four months it would also generate a positive effect in the BNB market.
“While an immediate increase in its price cannot be guaranteed, the measure aims to reduce supply and, in conjunction with other strategies, contributes to greater long-term value for BNB holders,” adds Giudice.
BNB is the currency of the Binance blockchain, which like Ethereum hosts decentralized applications, but with lower fees.
Token burning: what they are and how they impact price
Cryptocurrency burning is a process by which a certain amount of tokens are permanently eliminated. Instead of punching banknotes as the Central Bank does, the mechanism consists of sending the assets to an inaccessible address, such as a wallet without a private key.
Cryptocurrency burns can have a positive impact on its price through the following logic:
- Supply reduction– By removing tokens from circulation, the supply in the market is reduced. This can generate an imbalance between supply and demand that, in theory, should lead to an increase in the price.
- Increased demand– Reduced supply may generate greater interest from investors, who may be willing to pay a higher price for the remaining tokens, as the scarcity of an asset often increases its perceived value
- Deflation: This mechanism allows the price to tend to increase. This is because there are fewer tokens available to dilute the value of each individual token
- Trust signal: demonstrates that the team behind the project is willing to take steps to reduce the supply and increase the value of the asset for its investors
In addition to Binance, they also burn Ethereum, Shiba Inu and Uniswap. The price of a cryptocurrency is determined by a multitude of factors, such as general market demand, currency utility, investor confidence, and general economic conditions.
“It is important to keep in mind that burning is not a guarantee that the price will rise, but it is a very strong indicator to take into account for an investment analysis,” says Pedro Rey.
