BNB Chain DEX volumes drop 24% in a week — Is BNB in trouble?

BNB Chain’s native token, BNB (BNB), declined by 16.1% between Aug. 23 and Sept. 2, falling from a high of $598.80 to a low of $502.10. However, significant buying activity emerged below $510, helping BNB recover some of its losses to currently trade at $517.

Investors are concerned that BNB may have entered a bearish market, particularly as the token hasn’t held above $610 since mid-June. 

Declining activity on BNB Chain creates sell pressure 

BNB Chain metrics indicate declining interest, especially in decentralized exchange (DEX) volumes. Consequently, traders are questioning whether the $400 level from Aug. 5 could be retested.

Some market participants suggest that BNB will only break out of its consolidation pattern once its co-founder and former CEO, Changpeng “CZ” Zhao, is released from detention in the United States. While there is no direct link between CZ and the BNB price, his strong personality and the anticipation surrounding his release could potentially impact the market.

X user Degen.eth, an anonymous altcoin trader, shared his views, predicting a BNB price surge, as the Binance mastermind is expected to be freed after pleading guilty to money laundering charges and serving four months in detention.

Even if this “insane green candle” materializes, it’s likely that traders will try to front-run the event, buying ahead of CZ’s release and taking profits as the date approaches. Therefore, buying BNB purely based on the anticipation of CZ’s release seems risky, especially given the recent weakness in BNB Chain activity.

From a broader perspective, despite its recent underperformance, BNB remains the third-largest cryptocurrency by market capitalization — excluding stablecoins — currently valued at $75.7 billion. For context, this represents a 23% premium over SOL’s (SOL) market cap of $61.5 billion.

Interestingly, the Solana network holds higher deposits in its smart contracts than BNB Chain. To make matters worse, BNB Chain’s total value locked (TVL) recently dropped to its lowest level since February 2021, suggesting that investors are finding better opportunities elsewhere, as total cryptocurrency TVL has grown by 27% year-to-date in 2024.

Data shows that total deposits in BNB Chain’s smart contracts fell to 7.5 million BNB on Aug. 20, a 14% decrease over three months. Notable declines include PancakeSwap, the leading DEX, which saw its TVL drop by 15% to 2.93 million BNB, and PinkSale, a decentralized launchpad, which experienced a 26% decline in TVL.

To put this in perspective, the Ethereum network’s TVL increased by 7% in Ether (ETH) terms between May 20 and Aug. 20, while Solana network deposits rose by 28% in SOL terms during the same period. Thus, the factors driving investors away from BNB Chain’s decentralized applications (DApps) appear to be specific to this network.

Related: Ethereum layer-1 network revenue collapses. What’s causing it?

BNB Chain is losing ground in DEX activity, which is concerning

DefiLlama data shows that BNB Chain’s DEX volumes declined by 24% in the seven days leading up to Sept. 2, significantly underperforming Ethereum, which saw a 4% drop in activity during the same period. Similarly, DappRadar reports that the number of active addresses engaging with BNB Chain smart contracts decreased by 18% over the same seven-day period, compared to a 5% decline on Ethereum.

More concerningly, according to DappRadar data, all of the top five BNB Chain DApps experienced a sharp decline in active users within those seven days. This includes Move Stake, Treasure Ship Game, PancakeSwap, StarryNift and Galxe, indicating that the downturn has affected games, staking services, DEXs and Web3 applications alike.

In essence, part of the BNB recent price downtrend appears to be linked to declining activity and deposits on the BNB Chain. While this doesn’t invalidate the hypothesis that BNB could rally back to $600 due to the excitement surrounding CZ’s release from custody, it does suggest there is little fundamental reason to be bullish.