Binance, the largest cryptocurrency broker on the market, announced burning 2.13 million BNB tokens (Binance Coin), equivalent to approximately $450 million. This move reflects the company’s strategy to increase the scarcity of BNB and thereby theoretically increase the value of its native token.
The company’s CEO, Changpeng “CZ” Zhao, took to X (aka Twitter) to celebrate his cryptocurrency’s 25th quarter burn. Notably, he said BNB has become “deflationary”. Investors immediately reacted to the announcement, causing BNB’s share price to rise by more than 3% in recent hours.
As published by Binance itself, the broker eliminated another 2 million BNB tokens in each of the three burns that took place in 2023. The actions are intended to instill confidence among BNB holders, highlighting Binance’s strategy with the valuation of the digital currency.
Deflationary #BNB https://t.co/pPvFHRh44M
— CZ 🔶 Binance (@cz_binance) October 16, 2023
BNB fire
Binance has burned a total of 50 million BNB tokens so far. The company uses an automatic burn mechanism to reduce the total circulating supply of the asset to 100 million BNB.
The mechanism calculates the amount of BNB to burn based on the price of BNB and the number of blocks generated on the Binance network (BNB Smart Chain (BSC)) during the quarter.
According to the BNB fire portal, the estimated value of the next burn is 2,180,464 BNBs. However, current data shows that the number of tokens is likely to increase during the 26th quarter burn of BNB tokens.
According to Binance, the current 25th token burn was more than just standard procedure; it introduced the BNB Auto-Burn process, which improved the efficiency and transparency of the event.
Additionally, another 314.69 BNB tokens were removed from circulation through the Pioneer Burn Program, an approach that Binance says has further contributed to the token’s scarcity.
By automating the burning process, Binance is setting a precedent that could inspire similar initiatives across multiple blockchain projects.
However, it is crucial to maintain a certain level of pragmatism when analyzing these symbolic burns. Although they strive to create scarcity, the market price of BNB is not solely dependent on circulating supply.
External factors such as broader cryptocurrency market trends, regulatory developments and macroeconomic indicators play an important role in determining BNB’s market value.
It is worth remembering that another Binance cryptocurrency, BUSD, was shut down by the broker after undergoing surveillance in the United States.
Therefore, investors should pay attention to the regulators’ moves and not blindly invest in assets that promise appreciation through combustion processes.
Furthermore, the exchange’s willingness to innovate within its token ecosystem highlights its position as an industry leader and its commitment to providing its users with a reliable and innovative experience.
What is BNB burning?
The practice of token burning, as recently carried out by Binance, serves as a strategy to influence the value and trust in a cryptocurrency. During the event, the company will withdraw tokens from circulation.
This measure has a twofold purpose. First, reducing the number of tokens in circulation creates relative scarcity, which could theoretically increase the value of each remaining token. This is positive for investors and BNB holders as it can lead to increases in value over time.
Furthermore, token burning is seen as a concrete measure that strengthens investor and user confidence towards the company and its ability to maintain the integrity of the token as a digital asset.
While token burns are an effective strategy to influence the value and confidence in a cryptocurrency, it is important to emphasize that the market is influenced by other external factors, including regulation.
Although burning tokens is a positive move, the value of the token is still subject to such external influences.
Source: Live Coins
Barry Siefert is an accomplished journalist and author at The Nation View. He is known for his expertise in the field of cryptocurrency, and has written extensively on the topic. With a background in finance and economics, Barry has a deep understanding of the underlying technology and market forces that drive the crypto industry.
