Thursday, July 25, 2024

BNB price risks 40% drop as SEC launches probe against Binance


Binance Coin (BNB) price dropped by nearly 7.3% on June 7 to below $275, its lowest level in three weeks.

What’s more, BNB price could drop by another 25%-40% in 2022 as its parent firm, Binance, faces allegations of breaking securities rules and laundering billions of dollars in illicit funds for criminals.

Two bad news in a row

BNB was issued as a part of an initial coin offering (ICO) in 2017 that amassed $15 million for Binance.

The token mainly behaves as a utility asset within the Binance ecosystem, primarily enabling traders to earn discounts on their trading activities. Simultaneously, BNB also functions as a speculative financial asset, which has made it the fifth-largest cryptocurrency by market capitalization.

BNB market capitalization was $45.42 billion as of June 7. Source: CoinMarketCap

As a result, the US Securities and Exchange Commission (SEC) is investigating whether the ICO of BNB tokens in 2017 was sales of securities that should have been registered with the regulator, according to sources contacted by Bloomberg.

This risks putting downward pressure on BNB’s price, which has already lost more than half of its value after peaking out in May 2021 at around $700.

BNB holds above May-July 2021 support

In addition to the bad news, BNB’s plunge also came as a part of a broader correction trend elsewhere in the crypto market, with top coins Bitcoin (BTC) and Ether (ETH) dipping by 7% and 7.25% on the same day.

Now, BNB tests the 61.8 Fib retracement level (near $274) of the Fibonacci retracement graph sketched from its $10-swing low to $700-swing high. Interestingly, the same level was instrumental as support during the May-July 2021 session that preceded a 170% price rally.

But weak fundamentals, including the Federal Reserve’s hawkish policy, have raised BNB’s possibility of dropping below the 61.8 Fib line.

Related: The crypto market dropped in May, but June has a silver lining

If this happens, then BNB’s next downside target could be its 200-week exponential moving average (200-week EMA; the blue wave) near $200, down about 25% from today’s price.

The BNB/USD pair’s weekly relative strength index (RSI), now at 34, also shows more room to drop until the reading hits 30, an oversold level that indicates buying sentiment.

BNB/USD weekly price chart. Source: TradingView

Meanwhile, a further drop below the 200-week EMA could have BNB eye the 0.786 Fib line near $160 as its support, down by 40% from today’s price.

Conversely, if BNB manages to hold strong above $274, it could rebound toward the area defined by its 0.5 Fib line around $355 and its 50-week EMA (the red wave) near $380, up over 20% from the current price level.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Every investment and trading move involves risk, you should conduct your own research when making a decision.