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Potential Short-Term Weakness for BNB? Two Significant Levels Provide Insight

Reduced BNB circulating supply at a 20-month minimum of 139 million: A result of increased token burn and growing spot market demand.

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Potential temporary weakness in BNB's near-term performance suggested by two crucial indicators
Potential temporary weakness in BNB's near-term performance suggested by two crucial indicators

Potential Short-Term Weakness for BNB? Two Significant Levels Provide Insight

Binance Coin (BNB) Faces Mixed Market Conditions Amid Supply Reduction

In a recent development, Binance Coin (BNB) has seen a surge in on-chain activities, with the number of active users reaching a weekly average of 10.7 million. This increase comes at a time when the supply of BNB has been steadily decreasing.

The reduction in supply is largely due to the Binance team's token burn strategy. A total of 62.8 million BNB has been burned so far, with an average of 1.5 million burned every quarter. This move creates a positive price action by reducing potential selling pressure if market demand remains constant or rises.

The sustained token burn leads to deflationary pressure, as fewer tokens over time increase scarcity. However, this scarcity has not yet translated into significant price increases. Factors such as broader market conditions, regulatory uncertainties, and potential selling pressure on related altcoins like Ethereum could dampen BNB's upward momentum.

One of the most significant challenges for BNB is the performance of Bitcoin. The recovery of altcoins like XRP—and by extension potentially BNB—often depends on Bitcoin regaining its previous highs. If Bitcoin fails to do so by year-end, it may be difficult for BNB's rally to start.

Despite these challenges, BNB has shown resilience on its price charts as supply declined, while on-chain activity and spot demand remained strong. The number of chain transactions for BNB surged 13.6% over the past week, reaching 96.83 million with a daily average of 13 million.

At press time, the altcoin saw 21.38k in Buy Volume compared to 18.25k in Sell Volume, resulting in a positive Buy Sell delta of 3.13k. However, the Stochastic RSI has flipped bearish and declined to 79, suggesting potential buyer exhaustion.

Another indicator of accumulation is the negative Spot Netflow reported by CoinGlass. Over the past three days, BNB has recorded a negative Spot Netflow of -$10.18 million, with netflow currently at -$6.27 million, indicating higher outflows - a sign of increased spot accumulation.

These market conditions position BNB for more gains on its price charts. If they hold, BNB could reclaim $944 and rally to another high. However, if buyers remain exhausted, BNB's retracement could be prolonged, with $883 as the new support.

In conclusion, while the supply of BNB has reached a 20-month low, the altcoin's price action remains cautious. The ongoing market conditions could either propel BNB to new highs or prolong its retracement, depending on the strength of buyer interest and broader market conditions.

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