Binance coin (BNB) is setting up a technical pattern that may pave the way for a drop of around 25% in the coming weeks.
Despite a strong previous year when the digital asset gained more than 120% in value, the coin has dropped almost 50% since November 2019. The fall may continue in January as well because of the negative technical picture that surrounds the BNB price action.
Arguably the strongest factor behind the rise of the BNB is its use case. Binance, a major cryptocurrency exchange, has designed BNB in a way that has a high degree of utility. The entire Binance ecosystem contains of Binance.com, Binance.US, the Binance DEX, Binance Launchpad, BEP2, and margin trading.
It was recently announced that Binance.US, Binance’s subsidiary for the market of the United States, has opened beta testing of its iOS application to all users. News such as this one directly contributes to the growth of Binance’s impressive ecosystem.
However, the success of the technical side of the project didn’t translate into the increased market value for Binance.
In July 2019, the founder of Binance Changpeng Zhao (CZ), announced that Binance Coin is available for margin trading, with a sarcastic warning for traders not to sell the coin on the market.
Since CZ tweeted the announcement, the BNB has lost more than 50% of its value. Hence, if you did the opposite of his advice, you would have made a lot of money.
Fundamentally, there is no clear indication as to why BNB performed poorly in the second half of the year. For this reason, we have to move to the technical analysis to better understand the reasoning behind such underperformance.
As seen in the chart below, the BNB price action is in a clear downtrend. Since June 2019, when the market peaked at $43.15, there has been a clear trend of lower highs, which indicates that the market is feeling strong pressure to the downside.
Binance Coin daily chart (TradingView)
Furthermore, the price action is also trading below two key technical indicators – the moving average. Given that the market has failed to move higher in a few attempts, we believe that BNB is well-positioned to continue to move lower.
For BNBUSD, the level around $14.50 is very important as it has played an influential market role in the past. Whenever the price falls below a certain important level, a re-test of the same level from the other side of the market is crucial for determining the future market behavior.
In this case, BNB failed to move back above this level which signals that sellers are still in control. Hence, the fact that we trade below $14.50 is a strong technical indicator that the market is poised to continue lower, barring any unforeseen circumstances.
If this scenario plays out, we believe that BNB will drop further to test next support levels behind the current market price. More specifically, we are looking at levels between $8.00 and $9.50 at least, as potential levels where BNB may head to in the short-term future.