The price of BNB, the native cryptocurrency of the BNB Chain (formerly Binance Smart Chain), jumped 4.5% intraday on June 5th to establish a new record high around $716. BNB's 24-hour gains of over 14% outpaced the broader crypto market, which rose 3.5%.
The rally lacks a clear fundamental catalyst and is instead driven by macroeconomic factors and technical indicators. Declining U.S. bond yields are boosting demand for riskier assets like crypto. The benchmark 10-year Treasury yield fell to 4.332% on June 4th from 4.63% five days earlier, while BNB's price surged over 20.75% in the same period.
Falling yields reduce the opportunity cost of holding crypto versus safer assets like cash and bonds. Signs of slowing inflation have prompted traders to expect the Federal Reserve's first 25 basis point rate cut to come in November rather than December. This is fueling an increase in appetite for crypto and stocks.
From a technical perspective, BNB's gains represent a breakout from an ascending triangle pattern, triggered by support from its 20-day and 50-day exponential moving averages. An ascending triangle forms when price fluctuates between a rising support line and horizontal resistance. Breakouts from this pattern tend to lead to further upside.
BNB is now eyeing a move toward $800, up about 15% from current levels. However, the daily relative strength index has entered overbought territory above 70, increasing the chances of a correction or consolidation in June. A pullback to the $630 area, down 11.5%, could materialize if BNB faces resistance at its 1.618 Fibonacci retracement around $708.
While BNB's price has surged, its weekly chart still shows a 9% loss due to a significant correction earlier in August driven by reduced investor appetite for crypto. However, BNB has outperformed most altcoins, down only 1% in the past 30 days compared to a 7% decline for the overall altcoin market cap.
Improved macroeconomic sentiment, as evidenced by gains in the S&P 500 and crude oil, is fueling the BNB rally. Traders are becoming more confident in interest rate cuts in 2024 as the economy potentially weakens. This could boost corporate earnings and crypto prices.
However, on-chain metrics show BNB Chain's total value locked (TVL) grew just 9% in two weeks, lagging competitors like Solana, Ethereum and Avalanche. And while BNB Chain's decentralized app volumes surged 45% in the past week, its active user growth trailed Solana and Ethereum. The lack of derivatives demand and slower TVL growth casts some doubt on BNB's ability to extend gains to $590. But its solid on-chain activity still supports recent price appreciation, making a drop below $500 unlikely.
