BNB up 39% despite smart contract deposits down 28% – Should investors be worried?


The total market cap of cryptocurrencies rose from $860 billion on June 30 to the current $1.03 trillion, a relief of 20.6% in five weeks. Ether (ETH) may have been the absolute leader among the largest smart contract chains, but BNB managed to gain 39% during that period.

BNB (blue) vs. Ether (orange), AVAX (cyan), SOL (yellow). Source: TradingView

The year-to-date performance of BNB token remains negative at 43%, but its current market cap of $49.5 billion is the third largest, excluding stablecoins. In addition, PancakeSwap is the leading decentralized application (DApp) – 843,630 active addresses in the last seven days – running on BNB Chain.

The token primarily serves as a utility within the Binance exchange ecosystem, allowing traders to earn discounts or participate in token offers. So technically, the BNB token does not give any ownership rights or dividends to any company or service owned by Binance.

However, according to Bloomberg, the US Securities and Exchange Commission (SEC) is investigating whether the initial coin offering (ICO) of BNB tokens in 2017 consisted of a sale of unregistered securities. A digital asset may fall under SEC scrutiny if buyers intend to capitalize on the efforts of a company or project funded by the capital increase.

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To understand whether BNB’s 39% rally in five weeks is justified, investors need to analyze network usage, including smart contract deposits, active users and decentralized application deployment.

Mixed data of smart contract deposits and DApp usage

BNB Chain’s primary decentralized application metric started showing weakness earlier in May as the network’s total value (TVL) fell below 24 million BNB.

BNB Chain Network Total Value Locked, BNB millions. Source: Defi Llama

The chart above shows how BNB Chain’s DApp deposits have fallen by 28% in three months as the indicator hit its lowest level since April 2021. In comparison, Ethereum’s TVL currently stands at 24.4 million ETH, down 11% over the same period. In addition, another DApp competitor, Solana (SOL), saw a 2% drop in TVL to SOL 50.2 million.

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On the bright side, on August 3, the Binance exchange announced the launch of its first-ever token, intended to certify verified user status on the platform. Binance Account Bound (BAB) token is a decentralized identity tool displayed to indicate that a wallet owner has passed Know Your Customer (KYC) verification on the exchange.

To confirm whether this drop in TVL should be of concern, one needs to analyze DApp usage statistics. Some DApps are not financially intensive, so the value deposited is irrelevant.

BNB Chain’s most used DApps for seven days. Source: DappRadar

As shown by DappRadar data, on Aug. 4, the number of BNB Chain network addresses interacting with decentralized applications rose 17% on average. The only negative change was SecondLive, a metaverse that uses decentralized finance and NFT technologies.

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Increased use of DApps is not supported by additional addresses

The growing interest in BNB Chain DApps was not reflected in active network addresses, which peaked at 2.27 million on December 1, 2021 and averaged just over 900,000 recently.

Active BNB smart chain addresses. Source: BCScan

While BNB Chain’s TVL has been hit the hardest compared to comparable smart contract platforms, there is solid network usage in decentralized financial (DeFi) applications and games. Both Era7: Game of Truth and MOBOX: NFT Farmer are in the top 10 of DApps on every blockchain covered by DappRadar.

The above data suggests that BNB Chain’s TVL is losing ground against competing chains, but investors need not worry as DApps activity in the network remains strong. As long as the Binance exchange does not face serious barriers in supporting the BNB chain, there is little reason to be bearish on the BNB token.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of TBEN. Every investment and trading move involves risks. You should do your own research when making a decision.