Binance Coin's Correlation with Increased Users and Volumes on Binance Exchange

Binance Coin (BNB) is the native cryptocurrency of the Binance ecosystem. As the world’s largest cryptocurrency exchange by trading volume, Binance has seen incredible growth in users and trading volumes since its launch in 2017. Interestingly, this growth has correlated with an increase in the price and usage of BNB.

The Launch of Binance Coin

Binance conducted an initial coin offering (ICO) in July 2017, raising $15 million by selling 100 million BNB tokens. The purpose of launching BNB was to provide a utility token to power the Binance ecosystem.

BNB was created as an ERC-20 token on the Ethereum blockchain. However, Binance later launched its own blockchain called Binance Chain and migrated BNB to this new network. This allowed much faster transaction times and lower fees compared to Ethereum.

Growing Utility and Demand for BNB

As a utility token, BNB has several key functions on the Binance platform:

  • Trading fees - BNB can be used to pay for trading fees on Binance Exchange, with discounts offered for using BNB.
  • Participating in ICOs - New tokens sold through Binance's ICO platform require purchase with BNB.
  • Payment - BNB can be used to pay for transactions fees on Binance Chain as well as make payments for certain services.

The utility and demand for BNB have grown over time as the Binance ecosystem has expanded. For example, there are now over 1,000 merchants that accept BNB as payment.

Binance User Growth and Trading Volumes

Since launching in July 2017, Binance has seen exponential growth in registered users and trading volumes.

Some key stats:

  • From launch to December 2017, Binance added 1 million users.
  • By June 2018, Binance had added 9 million users, reaching 10 million total.
  • As of 2021, Binance has over 90 million registered users.
  • Binance reached $1 trillion in total trading volume by the end of 2021.

This massive user and volume growth helped catapult Binance to becoming the largest crypto exchange. Binance continues to lead globally with around $50-60 billion in daily trading volumes.

BNB Price Reacts to Binance Growth

The price of BNB has surged alongside major growth milestones for Binance exchange.

For example, the price jumped +150% in the 2.5 months from December 2017 to February 2018 as Binance added 9 million new users. And throughout 2021, BNB price kept setting new highs as Binance volumes exploded.

Increased use of BNB for trading fees, ICOs, and payments has driven up demand. And speculation around the growth of Binance in general also lifts the BNB price.

The total supply of BNB is limited to 200 million tokens. Therefore, growing demand against limited supply puts upward pressure on BNB's value.

BNB Becomes 3rd Largest Cryptocurrency

Thanks to the continued growth of Binance and speculative interest, the price of BNB roared higher in 2021.

In May 2021, BNB became the 3rd most valuable cryptocurrency by market capitalization behind only Bitcoin and Ethereum. It reached an all-time high price of $690 in May 2021.

Being a top 3 coin validates the Binance ecosystem and cements BNB as a leading crypto. Large market cap brings even more users and demand.

Summary of BNB Growth Factors

In summary, the major factors contributing to the growth of BNB are:

  • Expanding utility and use cases for BNB on Binance platform
  • Rapidly growing user base and trading volumes on Binance exchange
  • Speculation and hype around Binance's rise to the top exchange
  • Liquidity and accessibility on Binance making BNB attractive
  • Fixed token supply unable to meet growing demand

As the preeminent exchange and its native token, Binance and BNB reinforce each other's growth in a positive feedback loop. This trend is likely to persist into the future if Binance maintains its dominance.

“As a long-time crypto trader, the relationship between Binance's success and BNB's increasing price has been amazing to watch. It feels like BNB is just getting started too.”

Correlation or Causation Between BNB and Binance Growth?

While the growth of Binance and BNB are clearly correlated, an important question is whether there is any causation between the two.

  • Has BNB growth been a direct cause of increased users and volumes for Binance?

Or has Binance's growth led to increased BNB demand in a one-way relationship?

There are reasonable arguments on both sides:

  • Yes, BNB growth contributes to Binance growth - The ICO platform and BNB discounts incentivize users to trade on Binance. Speculation around BNB also attracts users.
  • No, Binance growth drives BNB - But Binance likely would have dominated anyway due to first-mover advantage. BNB has mainly benefited from Binance's expansion.

In reality, there is likely some mutually reinforcing causation. But the majority of evidence suggests Binance drives BNB more than the reverse.

What Factors Could Disrupt This Correlation?

While the growth of Binance and BNB have been closely tied together so far, there are risks that could sever or weaken this relationship:

  • New regulations that restrict Binance's business or target BNB specifically could dampen growth.
  • Increased competition from other exchanges like Coinbase, Crypto.com, and FTX could reduce Binance's market share.
  • If Binance's ICO platform declines in popularity, it may impact a key use case for BNB.
  • A major hack, outage, or scandal could damage Binance's brand and cause users to flee.
  • Transitioning BNB to its own blockchain could be seen as disruptive by some users.

While not likely in the short term, such risks are worth monitoring for those investing in BNB based on the current correlation.

Conclusion

In conclusion, the data clearly shows a strong correlation between the increasing users and volumes on Binance exchange and the rising price and utility of its native BNB token.

While Binance appears to be the primary driver of this relationship, BNB also reinforces Binance's growth through incentivizing users and speculation. This symbiotic relationship seems poised to continue as Binance cements itself as the leading global crypto exchange. However, it's worth keeping an eye on disruptive factors that could sever or weaken this correlation sometime in the future.

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