Newcomers to the crypto trading scene usually find themselves quickly lost. While outsiders often believe trading cryptocurrencies is just about buying and selling Bitcoin and little more, once you start looking into it, you realize there’s a lot more to it – and there are a lot more cryptocurrencies than just Bitcoin.
More importantly, whenever newcomers ask for help, one of the answers they’ll get, no matter what they ask, will be “don’t invest in Bitcoin, invest in another cryptocurrency,” with every person seemingly having a different concept of what the best cryptocurrency to invest in might be.
Although now largely regarded as a leading cryptocurrency, Binance Coin is also mentioned among these desirable crypto tokens.
The token, which is offered by the largest crypto exchange, has its share of believers and investors, even when its price isn’t as high as Bitcoin’s or Ethereum’s.
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Binance is one of the largest crypto exchanges in the world, if not the largest player in the market. There isn’t a single crypto trader who doesn’t know about it and even when some might choose not to use it, you’ll hardly find any crypto user who actively doesn’t recommend it.
What is Binance Coin?
Binance Coin is a cryptocurrency used on the Binance blockchain – specifically, the blockchain’s main (but not its only) token.
Binance, the company behind the blockchain, is known for being one of the largest crypto exchanges in the world and also for being one of the main drivers of innovation in the field.
The token has been live since just 2017, and over that time, it has found its own niche in the crypto market. While initially it was only offered and traded by its parent company, these days several exchanges trade the crypto, eToro is among them.
How does Binance Coin work?
Binance Coin is a desirable token for several reasons. Unlike some of the more famous tokens, Bitcoin among them, Binance Coin exists to foster, and fuel projects held in its parent blockchain.
The Binance exchange blockchain (referred to as the Binance Smart Chain) is more than just a ledger. As stated earlier, Binance is more than just an exchange, and the company strives to find new and novel uses for blockchain technologies.
Moreover, knowing how difficult it can be to get a blockchain setup and running, it offers services on its own blockchain for startups proposing novel uses, in much the same way as Ethereum does.
The Binance Coin is the utility token at the heart of all of these activities, the token being used to pay for the processing power required to keep it all alive.
Moreover, the token has a few already implemented real-life uses that make it a desirable one for traders to own: If trading fees from the exchange are paid using BNB, traders get a discount on said fee.
Last year the discount was 50%, this year, it’s down to 25% - smaller, yet still a noticeable amount, particularly for big-time traders.
The fact that BNB comes from an established, already successful enterprise that’s pushing new and innovative uses for blockchain technology and also has several established applications make a great case, if not to run and invest in it, at least to look into it.
BNB is indeed one of the more interesting cryptocurrencies in the market, if only because of how successful its parent company is.
However, none of these reasons is on its own enough to invest – but that doesn’t mean there are no reasons to invest. It just means that having a coin that’s ambitious and comes from a successful enterprise doesn’t mean the coin is successful itself.
If we want to assess BNB’s value as a potential investment, we need to look just a little further.
4 Reasons to invest in Binance Coin
Binance Coin has established use cases, with more on the way
BNB isn’t a case of crypto for the sake of crypto. It’s instead a token with an actual use and a reason to be, and it’s already being traded and used to drive transactions on Binance exchange.
Besides being used to pay for transaction fees, Binance also allows users to participate in IEOs, purchasing tokens in them using BNB. Some of those IEOs only accept purchases using the crypto token, giving it another use for crypto investors.
Among the less known uses, BNB is the native coin used in Binance DEX – the decentralized arm of the exchange, which is safer and more reliable than the default website.
It is also the only currency that can be used in Binance Launchpad, and it’s expected that all further crypto projects from Binance will use the token.
Among the already announced future uses for it is a staking system that will allow users to stake their held BNB, in order to receive some compensation in form of more tokens in distribution.
Binance is pushing crypto adoption, and its token reflects on the company
The Binance exchange is one of the newer crypto exchanges, yet in a matter of just two years it grew from nothing to a behemoth that’s now one of the largest players in the cryptocurrency market.
Since the market is still far from settled and large players, such as Facebook, are expected to fully launch during the next year or two, it’s always good to hedge one’s bets on tokens that are unlikely to fail shall the market shift.
BNB is far from the only token that isn’t expected to lose all its value even if newcomers to the market bring revolutionary proposals. However, it’s one of the safer smaller tokens since it would be almost impossible for its parent company to be bought out or become irrelevant.
Moreover, BNB’s value is intrinsically tied to that of its parent company, meaning that as long as Binance keeps on being successful the token shall retain some of its value and its case uses.
This doesn’t mean the token will go up and down as the company does, but it would be foolish to believe Binance’s own performance won’t affect the price of its tokens.
The supply is dwindling
Here’s a particular situation, one that’s uncommon among cryptocurrencies: BNB’s supply, far from growing, becomes smaller every year.
As part of the token’s design, 20% of the income from its transactions is used to buy back tokens and send them to an unusable address – effectively removing them from existence.
This creates an ecosystem where the token is expected to appreciate instead of deprecating over time, since the supply will dwindle as time goes on.
There’s a cap to this, of course – specifically, when 50% of the total BNB tokens have been burned, the burns will stop – but as long as this cap hasn’t been reached, BNB can be expected to gain value and increase trading volume with each successive burn.
It’s relatively cheap
Purchasing Bitcoin can be difficult for many due to the almost ridiculous price the token commands. While you can naturally buy very small amounts of it, many investors don’t feel too great about owning a thousandth of a Bitcoin, since the number seems infinitely small.
BNB is one of those tokens that you can get seemingly decent amounts of without needing to invest too much money. Just a few hundred dollars will net you some zones of BNB, giving your investment a more tangible presence.
Naturally, just having crypto for the sake of having it is unimportant. However, having higher numbers does help – it’s easier to calculate how much you have saved of a cryptocurrency if you own, say, six tokens, than if you own twelve thousandths of a token.
This means you’ll be able to more quickly understand how much your investment is worth and make decisions based on it.
4 Things you should know before investing on Binance Coin
Not everything is great and beautiful when investing on Binance Coin. While this doesn’t mean there’s a dark side to the token (that we know of,) there are reasons to hedge one’s bets on it.
To be fair, there are reasons to hedge one’s bets when looking at any cryptocurrencies, but since we’re talking about BNB, in this case we’ll be looking at what you should be wary of before jumping in.
Being tied to Binance is good… as long as Binance performs
One of the reasons to invest in the token can work as a double-edged sword. Being tied to Binance makes this token relatively safe, but only as long as Binance managed to remain relevant.
Now, right now, there is no reason to believe the company will go under – but the fact remains that it might. Due to this, if you decide to invest on BNB, you should not just keep an eye on the token itself, but also on the exchange, its side projects, and how they’re all doing.
The price of the token will likely reflect these. Also, on the brighter side, with Binance churning out new projects each day like the planned stablecoins and already existing Binance Bitcoin-pegged token (BTCB), the chances of the exchange -and thus, BNB growing stronger is enhanced.
It’s not a widely exchanged token
While basically every crypto exchange in the world trades on Bitcoin and the vast majority accept Ethereum too, BNB is only exchanged in a bit over a dozen crypto exchanges.
This means that certain trading strategies you can perform with other tokens, such as exchange-hopping to play the market, will be possible with BNB on fewer platforms.
It also means that, shall the market for the token crash, it will be even more difficult to find people or places interested in purchasing your tokens than it would be if you were holding a widely traded cryptocurrency.
Binance is centralized – and its safety rating not the best
This one here is reaching a bit, since Binance is rolling out a decentralized exchange, but it still bears mentioning: As of 2022, the vast majority of transactions on Binance happen through its centralized exchange, with BinanceDEX being so far a smaller side-project.
Binance, the main exchange, is centralized, which opens it up for attacks or hacks in a way that is not possible with a decentralized exchange.
And in Binance’s case, the company has seen hacks before. While the users didn’t lose any of their savings during those attacks -thanks to Binance having an insurance policy, a situation like this taking place again will be hard on BNB holders.
This is such that a hack will doubtlessly take its toll on the BNB valuation, even if none of Binance’s clients lose their crypto.
It's blockchain isn’t the most groundbreaking
While the Binance chain is indeed pushing the technology forward, whether it will ever grow to become a leading blockchain for general use is yet unknown.
There are certainly interesting proposals, and several of its current fringe uses, such as pegged tokens tied to other cryptocurrencies, might help usher its adoption, but those features are hardly unique to Binance.
More importantly, one of the fastest-growing groups inside the crypto community is the dApps one.
However, these apps depend on smart contracts, which the Binance blockchain doesn’t support. This keeps it out of a large part of the market and, while hardly spelling its doom, it can work against Binance.
How to invest in Binance Coin
Investing in Binance Coin can be done in most of the ways you could do other cryptocurrencies. However, thanks to its smaller market and fewer exchanges trading it, some strategies that might be sound or possible when trading large cryptocurrencies won’t be feasible here.
Buy and Hold
The default investment scheme is so described. Purchase when values are low, then sell as the values go up. In a way, BNB was designed for this type of investment.
The regular token burn means supply is going down, and as supply goes down, values should go up. The fact that staking will soon be added as a feature on the platform only strengthens this method, as holders will be able to profit from rising prices as well as get rewarded for holding BNB with even more BNB.
Of all possible investment methods, this one is easily the most recommendable one for the Binance Coin.
IRA Investments are a variation of buy and hold, and therefore BNB is well suited to these too. The coin tends to have a stable price, which should keep your savings from losing value, and the option to stake your BNB long-term and earn more BNB for doing so is tailor-made for retirement investments, which tend to be long-term to begin with.
The one problem with using BNB for IRA investments is how few exchanges trade it. If you’re managing your IRA investments on your own that will be no problem, but if you’re managing it through an investment house, it might be unable, or unwilling, to perform the investment.
This will mean you’ll have to do it yourself, which for some people could prove too much of a hassle and an increased risk.
While hardly ideal for short-term trading, Binance Coin has peaks and valleys in its value just as any other cryptocurrency.
This means it can be traded short-term and, if one is skilled about it, a decent profit can be made. Many of the strategies used for short-term trading will work.
Both short-term purchasing and selling and its more extreme variation, called day trading, can be done with BNB. One notorious exception, however, is the most extreme of short-term investment strategies: Leverage.
Now, it might be possible to leverage using BNB for day trading. You might be able to find someone willing to lend you the money for it, and some exchanges might even be up for allowing it openly.
However, the reduced number of exchanges means it will be much more difficult to pull off this strategy. The fact that BNB’s day-to-day fluctuations tend to be smaller than those of other, more volatile cryptocurrencies only serves to highlight this, as you might end up losing money thanks to a market where prices change too little for day trading to be viable, let alone to anchor on leveraging.
How to buy Binance Coin
So, what do you do if you want to add BNB coins to your crypto portfolio? As specialist crypto assets, Binance Coin can’t be bought just anywhere - although a few large exchanges do allow for it. In this case, we’ll explain the process of purchasing BNB via Binance.
The process is simple, as the Binance ecosystem is known for being a relatively easy exchange to use. It goes as follows:
- Register your Binance account. You’ll be asked for a username and password, although later on, you’ll need a few more things for verification.
- Verification is only required if you’re moving 2 Bitcoin or more a day. If you want to proceed with it, you’ll need a government-approved ID, proof of residence (usually in the form of a utility bill,) and a selfie of yourself with “Binance” written on a piece of paper.
- Binance Coin is one of the few tokens Binance allows you to purchase using your credit card. For this, select the “Buy with credit card option.”
- The option will lead you to a page where you can select which token you want to buy with credit card (you can only buy a few with this method, but BNB is one of them) and the amount.
- You’ll then be asked for your credit card details. Input them, and the transaction should happen immediately.
- You can now choose to move your BNB to a BNB wallet, or leaving them parked on eToro. eToro is a safe exchange for users, so in the case of a server hack you should be able to keep your crypto – however, if your account gets hacked, you’ll be out of luck.
Is a Binance Coin investment right for you?
Binance Coin has a bunch of good things going for itself, and it should be a decent -to- good investment as long as you don’t mind betting your money on the exchange itself doing well.
Currently, with the exchange being one of the largest crypt exchanges and the company expanding into several branches of crypto development while also pushing for general adoption as much as it can, it’s difficult to think any investment made on BNB might lose its value in the short term.
Therefore, Binance Coin is a recommended cryptocurrency to add to one’s portfolio. Do note that, just as with any other cryptocurrencies, owning BNB will mean you’ll need to be wary not just of the BNB prices, but the whole crypto market.
Even news unrelated to Binance or its coin can affect the token’s price. However, unlike when investing in other tokens, Binance Coin investors do need to be up to date with news about Binance itself and try and have the best grasp about the health of the company.
The token will always depend on Binance, so the better the company’s fortunes, the more its price should rise… and if the company starts to stumble, the opposite will happen.
Lastly, BNB, although a relatively safe investment, comes with a couple extra drawbacks when compared to other cryptocurrencies.
Still, its relative stability and the promising future for both the company and its blockchain makes it a good choice for crypto investors, both new and experienced.
Binance is one of the largest crypto exchanges in the world, if not the largest player in the market.
Asif is a cryptocurrency enthusiast and journalist who's been writing on the subject since 2014. He also has a keen interest in social engineering and cybersecurity. When not busy writing about cryptocurrency, he can be found reading books and listening to music. He holds an M.Sc in Life Science and an MBA in Finance & Banking.