3 Reasons BNB Price Risks Another 30% Drop By January
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Crypto exchange Binance’s native token, BNB (BNB), is poised for a significant price correction in the coming weeks based on a mix of technical and fundamental indicators.
BNB triangle collapse continues
From a technical perspective, BNB has entered the breakdown phase of its multi-month ascending triangle pattern, a trend continuation indicator. The breakdown might last until the price reaches the level set at a length equal to the maximum height of the triangle.
In other words, BNB’s triangle ascending target is close to $170, which is about 30% below the current price level, as shown below. The BNB/USD pair could drop to the mentioned levels by January 2023.
BNBUSD three-day price chart with ascending triangle breakdown. Source: TradingView
For now, BNB’s collapse move appears to be stalling near $222, which has served as a strong support level in recent history, including the declines seen after the May 2022 Terra (LUNA) collapse.
BNB could retest $222 as support based on a technical setup of the rising wedge forming on the four-hour chart, as shown below.
BNB/USD 4H price chart with rising wedge breakdown. Source: TradingView
BNB shorts are gaining momentum
The bearish technical setup for BNB is getting further clues from an increasing number of short positions.
Notably, BNB’s price decline observed over the past few days has coincided with an increase in its Open Interest (OI), which hit over $415 million on Dec. 18, its highest level since November 2021. One OI rising and one falling Price suggest that traders have opened new short positions in the BNB market.
BNB/USD daily rate chart vs aggregate open interest. Source: TradingView
Wick, options trader and analyst, said BNB could be in “big trouble” if Bitcoin (BTC) keeps falling. The daily correlation coefficient between BNB and BTC has been mostly positive throughout their history.
“First goal is $197,” he tweeted.
Binance bankruptcy fears drive exchange withdrawals
From a fundamental perspective, BNB looks weaker due to mounting legal issues faced by its parent platform, Binance. Binance could face potential criminal charges for money laundering and sanctions violations.
Related: Binance.US intends to acquire Voyager Digital assets for $1 billion
Additionally, the FTX debacle has also raised skepticism about Binance among investors. Many speculate that Binance, like FTX, may have used BNB as collateral for loans. While Binance has denied such rumors, its clarification did little to help BNB halt its downtrend.
BNB/USD daily chart. Source: TradingView
Additionally, growing uncertainty prompted customers to withdraw $3.6 billion worth of cryptocurrencies in a week, according to data released by Nansen on Dec. 13. Later the stock exchange USD Coin (USDC) withdrawals stoppeda stablecoin backed by its rivals Circle and Coinbase, fueling rumors that it could default.
Bitcoin Balance on Binance. Source: Glassnode
On Dec. 14, Binance CEO Changpeng Zhao downplayed bankruptcy risks, noting that the exchange experienced larger withdrawals during the Terra and FTX crashes, adding that its ability to meet withdrawal requirements is on the healthy side “stress tests” suggests.
“Now deposits are coming in again,” Zhao said.
This article does not contain any investment advice or recommendation. Every investment and trading move involves risk and readers should do their own research when making a decision.
