Record $600M BNB burn suggests Binance made $750M in profit in Q1

Binance Coin (BNB) saw its 15th burn to date on April 16. According to on-chain data, Binance burned nearly $600 million worth of BNB tokens.

Historically, Binance has burned around 20% of the exchange’s profits. But in the last burn, Binance burned much more than 20%, and the exact percentage of the burn remains uncertain.

BNB fundamentals keep improving

Sam Bankman-Fried, the CEO of FTX, one of the top cryptocurrency futures exchanges alongside Binance, estimated that Binance possibly generated $1 billion in revenue in the first quarter of this year.

By contrast, the total lifetime profits of Coinbase — which was listed on Nasdaq this week — are estimated to be somewhere between $780 million and $1.3 billion.

Bankman-Fried, commonly known as SBF, said:

“So, TL;DR, with a factor of ~1.5 or so uncertainty: Binance, Q1 2021: a) $1B rev, $750m profit –> $4B rev, $3B profit run-rate b) Blended average fee rate ~0.016% on trades c) They’re making it really clear that burn only goes until 100m tokens, but 60% of rev until then.”

Although Binance burned 20% of the exchange’s profit in the past, it is possible that Binance burned 70%-80% of the profit in its latest burn.

Considering this trend, SBF said that the $600 million burn could equate to around $750 million in profit. 

He added:

“Based on the original specs, BNB was going to burn 20% of profit. Based on this update, it’s now unclear what they’ll burn, but maybe something like: 80% of profit (up to 100m tokens, and nothing after that. Binance burned $600m of BNB for Q1. That would roughly imply $750m of profit. If we assume $1B of revenue, given their $6T of volume in Q1, that implies an average fee rate of 0.016% or so.”

Since March 27,  the price of BNB rallied 180% from $233 to as high as $640.

The rally closed the gap between BNB and Ether (ETH), with BNB now comprising over a third of Ethereum’s market capitalization.

The strong uptrend of BNB was influenced by the strong performance of Binance and its derivatives exchange, but also the upward trajectory of Binance Smart Chain.

In recent months, Binance Smart Chain saw a significant increase in daily transaction volume.

According to BSCScan, the blockchain explorer for Binance Smart Chain, the blockchain network saw the number of daily transactions rise from around 380,000 in late January to over 4.7 million as of April 16.

Binance Smart Chain transaction volume. Source: BSCScan

Since BNB is the native token of the Binance Smart Chain and it is actively used on platforms like Pancakeswap as a means to stake in various pools, the demand for BNB has continuously risen.

Binance Smart Chain’s momentum continues

According to Coingecko, BNB had the best performance to date with a 710% gain in the first quarter.

BNB/USDT 1-day price chart (Binance). Source: TradingView.com

Analysts at Coingecko attributed this upsurge to Binance Smart Chain emerging as an alternative to Ethereum due to the high gas fees on the Ethereum network.

The analysts said:

“Ethereum-Killer tokens outperformed both $BTC and $ETH Airplane departure $BNB had the best performance (+710% gain), followed by $ADA (+555%) and $DOT (+294%) This coincides with the rise of @Binance Smart Chain #BSC as a response to high gas fee on #Ethereum.”

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