Binance USD price prediction: Auditor pauses work with coin
The auditor of the cryptocurrency exchange Binance, Mazars has withdrawn from “proof of reserves” work with crypto companies in the wake of the collapse of the FTX exchange.
Binance, the world’s largest crypto exchange, saw $6bn of withdrawals in the three days from 12 to 14 December. A spokesperson for the company said Binance had managed the withdrawals “without breaking stride”.
Mazars said it had paused all proof-of-reserves work with cryptocurrency clients, including Binance, because of concerns about “the way these reports are understood by the public.”
In November Binance, announced “BUSD Auto-Conversion”. As a result, the platform is able to convert user balances and new deposits of USD coin (USDC), pax dollar (USDP) and true USD (TUSD) into its own stablecoin, binance USD (BUSD). The exchange says that this will help improve liquidity and capital efficiency, as well as providing benefits to users.
Both Binance and WazirX have announced plans to prioritise BUSD over other stablecoins.
So what does this mean for the future of BUSD?
Binance USD (BUSD) Live Price Chart
The price of the BUSB stablecoin saw increased volatility in the second and third quarters of 2022. The increased volatility could be partly attributed to instability and illiquidity in the current bear market, with BUSD trading between $0.9989 and $1.00 in a recent 24-hour window, according to data sourced from CoinGecko.
However, BUSD’s market cap has been increasing rapidly since January 2021, when it stood at just under $1bn. At the time of writing, on 16 December 2022, the token's market capitalisation stands at almost $19bn, and it is the third-largest stablecoin, according to CoinMarketCap. The other two major stablecoins are tether (USDT) and USD coin (USDC).
The data may be called into question after Mazars conducting a proof-of-reserves assessment of Binance earlier this month, which potentially finds its bitcoin reserves overcollateralized.
What is binance USD?
Binance USD is a stablecoin that is pegged to the US dollar (USD), a fiat currency. The value of the US dollar acts as a benchmark for the BUSD. The key feature of the coin is that one BUSD is intended to be equivalent to $1.
BUSD was founded by the blockchain infrastructure platform Paxos and cryptocurrency exchange Binance in 2019. BUSD is designed to minimise the risk of volatility experienced by most cryptocurrencies.
Binance says: “Due to the nature of cryptocurrency, crypto holders may experience volatile changes in their portfolio value. Using a stablecoin such as BUSD can help significantly to hedge against periods of market volatility.”
Unlike fully decentralised cryptocurrencies, BUSD is regulated by the New York State Department of Financial Services (NYDFS), according to Binance.
As part of the compliance and to support the value of the BUSD, Paxos holds an equal amount of US dollars to the total supply of the token. For example, for every 1,000 BUSD created, Paxos will need to hold $1,000 in reserve for the cryptocurrency. The withdrawal of 1,000 BUSD will lead to a burning of the tokens accordingly.
Binance says: “BUSD provides a monthly audited report of reserves in compliance with stringent regulatory standards to ensure the security and safety of user assets.”
According to Binance and CoinMarketCap, BUSD can be traded on over 30 exchanges. “BUSD also offers flexibility in allowing crypto users to quickly turn their holdings into a stable asset without moving off the blockchain,” added Binance.
Paxos issues BUSD (ERC-20) on the Ethereum blockchain while Binance creates BUSD (BEP-20) by holding BUSD in an Ethereum blockchain address and minting peg BUSD tokens. The asset holders can swap their tokens between Binance Smart Chain (BSC) and Ethereum.
Since BUSD launched in 2019, more applications and projects have adopted the use of the cryptocurrency. Binance claimed in April 2021 that there are more than 400 decentralised applications (dApps) that support BUSD.
CoinMarketCap says wallets such as Metamask, Trust Wallet, Trezor, Zapper, and many more allow users to hold BUSD. Platforms and services like travel booking site Travala, payments gateways such as Moonpay and Banxa, payment APIs including Wyre, and multi-currency payment services such as ivendPay and Paylot all support BUSD.
At the time of writing on 16 December 2022, there were just over 18.65 billion BUSD tokens in circulation.
Binance USD risk profile
The financial data provider InvestorsObserver’s recent analysis found little danger for holders of binance USD. InvestorsObserver’s risk analysis system said: “BUSD’s current risk score means it is a relatively low-risk investment.”
Binance USD was 0.11% lower as of the previous 24 hours of trading at 17:00 hours UST. The price movement coincided with the volume being below its average level and the token's market capitalisation risen. The market capitalization for the token now sits at $20,.54bn, while BUSB worth just over $8.4bn had been exchanged over the previous 24 hours. The price movement relative to the changes in volume and market cap recently gives BUSD a low-risk assessment.
The cryptocurrency research and data site Is This Coin A Scam gave binance USD has a safety score of 58% and was awarded a “good” rating, data retrieved on 16 December 2022 showed. The site said tbe BUSD token “is suited to an adventurous investment style”.
However, a report by Ethscan found 85% of the total supply of BUSD is held in just five addresses. Reporting on the BUSD auto-conversion plans, Bloomberg journalist Emily Nicolle said:
The past few months have seen several stablecoins become unstable amid high market volatility and the larger market’s bearish patterns. BUSD has, however, maintained its $1 peg, despite market pressure.
However, the risk of a backlash from market participants remains high as commentators consider a monopolisation and ultimately centralisation of stablecoins.
Binance USD coin price prediction
At the time of writing, DigitalCoinPrice gave an upbeat/stable Binance USD price prediction for 2023 and beyond, expecting the BUSD/USD rate to continue trading around the $1 mark.
Gov Capital held an “optimistic” BUSD prediction. The site’s BUSD forecast predicted the average price could be at $1.66 one year from now, rising to $5.63 by 2027.
However, it is important to note that any instability in the value of a stablecoin may be detrimental, as this type of cryptocurreny is not meant to fluctuate. Although stability may be expected by some members of the cryptocurrency community, the market is unregulated and the asset is unsecured. As demonstrated by the terraUSD fiasco back in May, investors may lose funds.
As a result, making long-term predictions, such as a binance USD price prediction for 2025 or a binance USD price prediction for 2030, is unfeasible.
While looking for binance USD crypto price predictions, traders should remember that the markets are volatile. Forecasts are based on inferences drawn from past performance by analysts and may go wrong, due to market gyrations, change in policies, and other unknown parameters.
Investors should also consider the token’s collaborations, partnership deals, and fundamentals before relying on predictions.
Always conduct your own research and base your decision to buy cryptocurrencies on your attitude to risk and how comfortable you are about losing money. You should never invest money that you cannot afford to lose.
FAQs
Is binance USD a good investment?
Binance USD’s value is more stable than other cryptocurrencies as it is pegged to the US dollar. However, whether binance USD is a suitable investment for you or not will depend on many factors, including your investment goals, portfolio composition and risk profile.
Will binance USD price go up or down?
Because BUSD is a stablecoin, it should keep to a value of $1, give or take a fraction of a cent. It isn’t meant to make or lose money in and of itself, instead acting as a stable store of value. However, crashes are entirely possible, as demonstrated by the depegging of terraUSD.
Analysts’ forecasts on a range of assets, including cryptocurrencies, can be wrong and have been inaccurate in the past. Cryptocurrencies are extremely high-risk investments and capital will be at risk, so you should do your own research and never invest what you cannot afford to lose.
Should I invest in binance USD?
There are multiple advantages and disadvantages to investing in BUSD, or any stablecoin for that matter. The main feature of a stablecoin is that its value will remain stable even after five years, and hence be a store of value. They are much less volatile than other cryptocurrencies, and are purportedly backed by the dollar.
However, the risk of collapse or bankruptcy is relatively high, and no gains are expected from investing in stablecoins.
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