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Binance Coin: Before you click on the ‘Buy’ button, read this

After recent of weeks of decrease and consolidation, accumulating BNB could sound a rational action to take. But on-chain metrics had an opposite viewpoint.

Published

1 year ago

on

  • Despite slight gains for investors in the past three months, BNB could face selling pressure.
  • Traders have resolved to overlooking the opening of BNB contracts.

Binance Coin [BNB], the native cryptocurrency of the Binance exchange, may have done well to remain above $300 despite the recent red days of the market. However, the resilience shown might not be confirmation that BNB is in a prime position for an uptick.

Read Binance Coin’s [BNB] Price Prediction 2023-2024

According to Santiment, the coin’s Market Value to Realized Value (MVRV) ratio has been increasing since 20 May. At press time, the metric was 7.211%.

BNB lacking attention?

Often viewed as a macro-oscillator, the MVRV ratio shows the ratio between the current price of an asset and the average price acquired while pointing out how overvalued or undervalued the asset is.

When the ratio increases, it means that investors are showing a willingness to sell, depending on the market cycle. Since this was the case with BNB, the increase had the potential to propel a further drop in value.

Source: Santiment

As a result, traders seem to be indifferent about the BNB price action, the funding rate revealed. At the time of writing, the BNB funding rate was 0%. This neutral state explains how longs and shorts were not interested in paying each other to keep their futures or options contracts open.

A further evaluation of the derivatives market activity showed that the Open Interest (OI) has been decreasing around the same period as the MVRV ratio started increasing. The OI measures the amount of money invested in contracts related to a coin.

Therefore, the OI decrease implied that both buyers and sellers were actively closing their positions. If it were to be the other way around, then it would mean that traders were jumping on the BNB

price action for potential gains.

Source: Coinglass

No cause for buzz

While the average sentiment toward the coin mildly increased over the last two weeks, it failed to exit the negative zone.

As of this writing, on-chain data showed that BNB’s weighted sentiment was -1.05. The weighted sentiment considers the positive and negative commentary on social networks. 

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So, when the metric is above the zero midpoints, it infers that the perception around the asset is mostly positive. However, the stay in the red zone suggests that the broader market was not optimistic about the BNB short-term price action.

Source: Santiment

At press time, the ratio was 6.583. Although the value was the highest for all of May, it was still considered low. Hence, market participants made more profits than losses in the month. But it was nowhere near the peak recorded in January.

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