Binance Coin (BNB), the native token of the Binance ecosystem, recently emerged as the top gainer among the ten largest cryptocurrencies by market capitalization, soaring over 5% within the last 24 hours. As of the time of writing, BNB was trading at $533, marking a significant recovery from its 24-hour low of $503. However, despite these promising gains, market analysts warn that BNB could face a bearish reversal if the broader cryptocurrency market fails to sustain its current bullish momentum.
BNB’s Price Action – A Double-Edged Sword
BNB’s recent price surge has closely mirrored the performance of Bitcoin (BTC), reflecting the token’s strong correlation with the broader market. This means that BNB’s ability to maintain its bullish trajectory is largely contingent on continued positive sentiment across the cryptocurrency landscape. However, technical indicators suggest that this uptrend may be losing steam.
On BNB’s daily chart, a potential bearish divergence is forming. Despite the recent price increase, the uptrend appears weak as BNB is showing a double-top pattern—a classic sign of an impending reversal. The first peak was formed in late July when BNB’s price surged from below $500 to test a key resistance level at $600. After this peak, BNB experienced a downtrend, forming a neckline at $464.
The uptrend resumed, but BNB failed to break the $600 resistance level for a second time. If BNB falls below $464, it could confirm a bearish breakout. On the other hand, if BNB manages to break above the resistance at the second peak, the bearish outlook could be invalidated, paving the way for further gains.
Technical Indicators Point to a Bearish Reversal
Several technical indicators are signaling caution for BNB investors. The Relative Strength Index (RSI) is currently at 47, suggesting that sellers still hold the upper hand despite the recent price rally. For the bullish momentum to hold, the RSI line needs to cross above the signal line, thereby invalidating the double-top pattern.
Additionally, the Directional Movement Index (DMI) indicates a weakening uptrend. The positive DI (blue) remains below the negative DI (orange), hinting at a possible bearish reversal. Moreover, data from Hyblock Capital reveals a high concentration of liquidations at $548. This level could act as a strong resistance point, as traders who bought into the rally may take profits to avoid potential losses, further stifling BNB’s upward movement.
Declining Usage of BNB Chain – A Cause for Concern?
Another factor that could dampen BNB’s rally is the declining usage of the BNB Chain. According to data from DappRadar, the number of unique active wallets on the network has dropped by 25% in the last week. Trading volumes have also plummeted by over 30%, falling from around $850 million to $350 million. This decline in network activity suggests that market interest in BNB may be waning, which could further challenge its ability to sustain recent gains.
Moreover, data from Coinglass shows that BNB’s funding rates have been predominantly negative over the past month, indicating a prevailing bearish sentiment among traders. This could pose additional headwinds for BNB, as it may struggle to maintain its recent price levels in the face of broader market skepticism.
While BNB’s recent surge is undoubtedly impressive, the token faces significant challenges in sustaining its bullish momentum. With key technical indicators pointing to a potential bearish reversal and declining network usage, BNB’s future performance remains uncertain. Investors should keep a close eye on the broader market sentiment and key resistance levels as they navigate the volatile waters of cryptocurrency trading.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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