Key Points
-
Binance experienced a major hack on Oct. 29.
-
That hack didn’t result in any of its coin being lost.
-
There isn’t much evidence for Binance’s exchange or its blockchain having become more popular over the last few years.
-
On the evening of Oct. 29, hackers stole an estimated $6.3 billion in funds from the Binance crypto exchange, marking the biggest hack in crypto history. The exchange has since promised to cover every customer loss, and it still has more than enough money on hand for that promise to be credible.
The exchange’s blockchain didn’t seem to be directly affected by the attack, yet its native token, BNB (CRYPTO: BNB), was down nearly 7% over the 24 hours since the breach. It’s still up by 212% over the last three years. So is BNB worth buying, or is the Binance hack the beginning of its end?
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue »
This event doesn’t hurt the coin
As of Oct. 30, Binance’s partners had frozen at least $3 billion of the stolen funds, and the exchange had set aside $6.3 billion to make its customers whole.
The drained wallets were among those listed in Binance’s monthly proof of reserves, briefly leaving Binance’s Ethereum reserves covering only about 94% of customers’ ether balances. By Oct. 31, Binance said a new reserve snapshot showed ether and nine other assets fully backed again. So the damage to Binance’s reserves looks small and temporary.
Furthermore, the hackers didn’t do or steal anything that would touch Binance’s supply of BNB.
The coin is used on the exchange’s blockchain, and holding it can buy fee discounts on the exchange itself, so its value depends entirely on investors’ trust in Binance, as it has no utility outside its ecosystem. And despite the theft, there is little indication that people have lost enough faith in Binance to stop using its exchange — the same as in prior instances where it was affected by market crashes, breaches, or other problems.
Would BNB be worth buying if the hack hadn’t happened?
In my view, there wasn’t a very strong investment thesis for buying BNB before the hack, and there isn’t one for buying it now, either. Here’s why.
BNB Chain destroys BNB coins every quarter via its Auto-Burn mechanism, which removes coins from the supply based on its price and how many blocks are produced by the chain over the quarter. There’s also another supply-reducing mechanism that destroys a portion of the BNB that’s used to pay each transaction fee on the network.
The point of those two processes is to make the coin more appealing to hold by linking the chain’s utilization to its supply.
Nonetheless, its base of transaction fees hasn’t grown over the last three years; in the last week of October 2023, it had $3.1 million in fees, whereas the same week this year saw only $2.9 million. And while it’s true that the coin’s price went up dramatically over that period, the data suggest that demand for blockchain use isn’t consistently growing, which significantly undermines the idea that BNB is going to be a good investment over the longer term.
So, even if the price of BNB could be much higher three years from now, I don’t think it’s worth buying.
Missed AI’s “Act 1”? Act 2 Could Be 14x Bigger
Most investors think they missed the AI boat because they didn’t buy Nvidia in 2005.
But according to our analysts, we’re only at the end of “Act 1″—the R&D phase. “Act 2” is the global rollout, a massive technology build-out that Google’s CEO says could be more profound than fire or electricity.
While everyone watches the chip designers, one “backbone” company provides the critical technology that Nvidia and AMD literally cannot function without. We’ve detailed this under-the-radar player in our new AI Playbook.
Continue »
Alex Carchidi has positions in Ethereum. The Motley Fool has positions in and recommends Ethereum. The Motley Fool recommends BNB. The Motley Fool has a disclosure policy.
