Binance Coin or BNB traded as low as $36 in January 2021 but its price has since then enjoyed impressive gains and is currently trading at $369.

Although it is up over 1,000% so far this year, it is currently discounted compared to its all-time high of $691.77 which it achieved in May before the recent market correction. If you would have invested just $1,000 when the price traded at 36 in January this year, it would be worth more than $27,000 right now.

What is BNB

Many exchanges have a native cryptocurrency that is commonly used to lower transaction fees and sometimes facilitate liquidity on the native blockchain. It can also be traded and spent like many other cryptocurrencies out there. Binance Coin is the native token on the Binance Smart Chain, the blockchain operated by the Binance exchange.

Why BNB has been growing at such a rapid pace

BNB’s growth is organic, which means it is not a pump and dump like many other cryptocurrencies out there. It leverages its growth from the utility that it provides to the Binance Smart Chain. The latter turns out to be not only one of the most reliable but also one of the fastest blockchain networks and can handle roughly 1.4 million orders per second. This makes it an interesting alternative to other networks such as the Ethereum network and is one of the reasons why many projects have launched on the Binance Smart Chain.

The network demand means more growth for the network, which means more transaction fees that are conducted through BNB. The exchange is also experiencing growth from the number of trades conducted on the platform regularly.  Binance has more than 13 million active users and making transactions with some cryptocurrencies can be expensive especially when prices soar. Binance Coin offers an alternative for lower transaction fees, thus allowing users to save on exchange fees.

Binance traders can purchase BNB just so they can use it for transactions. Binance also allows liquidity staking through BNB, which means people can buy the native token and stake it for a specific duration of time, during which they get to earn interest for providing liquidity. All these utility characteristics have played out quite well as far as demand for BNB is concerned, thus contributing to higher prices.

Value maintenance

Oftentimes, a utility cryptocurrency may experience low demand when the price is too high to make sense, and sometimes it might be heavily sold off that traders find it unattractive. Binance overcomes these potential problems through a BNB repurchase plan that it uses to maintain the value of the native token.

Note that BNB is a pre-mined cryptocurrency which means there will not be any new tokens made in the future. A total of 200 million Binance Coins were made in 2017 but the current maximum supply is 170 million coins. The exchange spends 20% of its profits on its BNB buyback program every quarter. The repurchased coins are bought back until 50% of them are repurchased.

The company plans to continue running the BNB buyback program until the maximum supply of BNB reaches 100 million. This strategy is quite effective at maintaining the value of BNB and the key thing to note is the limited target supply. The value of BNB will likely continue climbing over time, especially as demand for the Binance Smart Chain continues to surge. The crypto market is still in its early stages which means there is still a lot of value to be unlocked as the pace of adoption continues to grow.