Coinspeaker
Time to Sell Your BNB? Price Drops 7% Following Token Burn

Binance Coin (BNB) price has dropped seven percent in value since the platform’s latest token burn amid concerns and questions over the new method the exchange used for the burn.

Binance buys back its tokens every quarter, and in the past two years, it has burnt between 808,888 and 2.5 million tokens each time, with the aim of increasing the token’s value.

Previously it has bought back 20 percent of the exchange’s revenue, but this time the platform burnt the portion that had been locked up for the Binance team, leading to concerns it could devalue the currency in the long term, and a short-term price dip.

The BNB price has dropped since the burn on July 12, from around $32 per token, to close to $28.3 per token at press time, according to CoinMarketCap. This is a drop of around seven percent.

The tokens were already allocated to the exchange and were therefore not in circulation on the open market. In total 808,888 tokens valued at nearly $24 million were burnt.

The move has sparked widespread debate across Weibo, and led to He Yi, Binance co-founder, taking to the web to defend the move.

He Yi argued that the burn was the same as the previous seven token burns, but plenty of detractors across social media and elsewhere were lining up to criticize the move.

The chief allegation made against the exchange was that the change in how tokens are burnt could devalue the currency significantly, and could even lead to a sell-off as BNB investors dump their coins in favor of other assets.

There were also allegations the new method, that changes the source of the BNB that is destroyed, could profit the Binance team directly.

The official position of Binance was outlined in a blog post by CEO and founder Changpeng Zhao, who said that:

“According to the Binance whitepaper, 40% of the total BNB supply (80,000,000 BNB, currently worth about US$2,400,000,000) was allocated to the Binance team, as a reward to the work they have put into building the Binance ecosystem. But now, we are giving that up, and we will contribute this to the BNB burn.

With this change, we’ll still burn BNB based on trading volume on Binance per quarter. But this time, the Binance team has given up our token allocation. We are now committing to building the Binance ecosystem without getting any BNB from the initial allocation. The team will burn their own tokens first.”

While it’s unclear what effect the change in how tokens have been burnt will affect the long-term price, it’s clear from looking at market data that investors, in the short-term at least, have been panicked by the move.

What happens in the weeks and months ahead will be closely watched by investors, but it’s clear that while Binance had a great start to the year, the path ahead looks less certain.

Binance Coin has had a meteoric 2019 so far.

In just seven months its price has jumped up more than six times in value, while it has achieved an all-time high price. Interestingly, it’s managed to do this while most coins and tokens were still suffering from the effects of downward pressure from the bear market.

There are various explanations about this success, but many attribute the regular BNB token burns or ‘buybacks’ by exchange Binance, to helping the coin grow in value.

Essentially a buyback occurs when Binance ‘burns’ existing BNB tokens that are already in circulation.

Time to Sell Your BNB? Price Drops 7% Following Token Burn

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