Although investing in the stock market has been a proven strategy for building savings over time, there's no doubt that putting money into digital assets has the potential to create life-changing wealth. Some tokens have seen their prices skyrocket in short order, resulting in profit-seeking individuals getting in quickly.
One perfect example of this is Binance Coin (BNB 4.90%). A seemingly small $100 investment in BNB at its launch in July 2017 would be worth an incredible $25,000 today (as of Dec. 19). Let's take a closer look at this popular cryptocurrency and see if it's a good investment right now.
Overview of Binance Coin
Binance Coin is the utility token that is used to power the entire Binance ecosystem, which includes a popular cryptocurrency exchange and a native blockchain known as the Binance Chain. While it was first used to provide discounts on trading fees on the exchange, BNB can now be utilized for a wide range of activities, like decentralized finance applications, non-fungible tokens, and even the metaverse. And these supporting services help drive greater demand for BNB, supporting a higher price over time.
Founded by Changpeng "CZ" Zhao, Binance is currently the biggest cryptocurrency exchange in the world, with $6.7 billion in trailing-24-hour trading volume. And with a market cap of $39.5 billion, BNB ranks as the fifth-most-valuable crypto.
Unsurprisingly, BNB's price has risen so much thanks to increased interest in cryptocurrencies. Soaring digital asset prices in 2021 benefit the network as users flock to crypto and actively engage more. But the opposite is also true, as we have seen this year.
As one of the largest entities in the crypto world, Binance and BNB are exposed to the volatile nature of the overall industry. However, owning BNB means that you are essentially bullish on the growth of crypto as a whole. Instead of trying to pick individual tokens that you think could win over the long term, it might be a good idea to simply buy BNB if you are a believer.
Is BNB a good investment today?
Despite Binance Coin's monster return since its launch, I don't think investors should rush to buy the token just yet. After BNB peaked at a price of $691 in May 2021, it has fallen 64% in 19 months. While the overall cryptocurrency market has taken a huge hit this year, spurred by a risk-off sentiment among investors and a string of high-profile blow-ups of major companies in the industry, Binance might have its own set of troubles going on.
After FTX's implosion, characterized by risky, complex, and potentially criminal behavior, worries are mounting about Binance's solvency. Like FTX, Binance isn't based in the U.S., and this makes it difficult to truly gauge whether the exchange has adequate reserves like CZ says it does. This is because rules and regulations vary in each jurisdiction, and certain disclosures aren't required everywhere.
To be fair, he has saidd that Binance is "financially OK," though of course former FTX Chief Executive Officer Sam Bankman-Fried made similar comments before his business's spectacular blow-up. Making matters worse is that fact that over a 24-hour period last week, Binance's platform saw net outflows of $3 billion.
This is not to say that anything is wrong. Maybe Binance operates with enough liquidity and that customers and investors have nothing to worry about. But we've seen this movie before, and there is just too much uncertainty present. This should dissuade someone from being confident enough to buy BNB.
In my opinion, the best course of action right now is to wait and see what unfolds with Binance in the near future. There are just too many unknowns, and buying BNB without all the facts of the situation would be a poor decision. Nonetheless, the token's climb over the years is still impressive. And it demonstrates how much wealth can be gained by speculating on cryptos.
