The market capitalization of cryptocurrency exchange Binance’s native platform coin, BNB, took a battering today, plummeting in minutes from a high of nearly $4 billion, to close to $3 billion, a drop of 33 per cent.
Now, speculation is rife that the sell off is due to the recent quarterly token burn on July 12, which many view as misguided and badly handled.
The drop has forced Binance co-founder, He Yi, to take to Chinese social media and WeChat to defend the move, but has been widely criticised regardless.
It all centres on the decision by the Binance leadership team, led by CEO Changpeng Zhao, to change the way that it conducted the recent token burn.
Under normal circumstances the exchange would buy back tokens that are in circulation before destroying them, thus removing supply and increasing demand for the asset.
A new way?
But on July 12, instead of doing that, the Binance leadership team decided to burn its own token allocation, a portion of the asset’s supply that was ‘locked-up’ with them when the BNB coin was created.
The burn on July 12, saw 808,000 BNB tokens, valued at around $24 million being ‘burnt’.
But allegations spread like wildfire that this move devalued the asset, a prediction that now appears to be coming true. Many across WeChat and Weibo allege that the Binance leadership team used the burn as an excuse to ‘cash-in’ on the asset.
A move that would potentially anger supporters of the exchange and investors of BNB, if it were true.
Binance’s official stance on the new burn method was outlined in a blog post by CZ:
“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.”
One thing is for sure: it looks as though Binance’s and BNB’s history of dominating the market in the past six months could be at an end.