This Altcoin Has Skyrocketed 1,300%: Is It Still a Buy?

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Investors were looking for low-fee blockchains in 2021 for NFT transactions and DeFi returns -- this crypto project delivered.

Key points

  • Last year, Binance Coin (BNB) saw an annualized return of 1,344%, far surpassing Ethereum's 455% gains and Bitcoin's 73% increase, according to Arcane Research.
  • The big growth driver for BNB in 2021 was its lower fees for non-fungible token (NFT) transactions and decentralized finance (DeFi) services, which both saw explosive growth.
  • BNB is down 4.04% in the last 24 hours at the time of writing and is ranked No. 4 by its crypto market cap at $74.9 billion behind Bitcoin, Ethereum, and Tether respectively.

Bitcoin may have beaten the stock market in 2021, but it was eclipsed by other high-flying cryptocurrencies.

Binance Coin beats Bitcoin and Ethereum

According to Arcane Research's "Summary of 2021 in Crypto" report, Binance Coin (BNB) had a stellar year marked with a 1,344% gain. While Bitcoin and Ethereum also ended the year in the black, their respective returns of 73% and 455% were anemic by comparison. All are currently ranked in the top four projects by market capitalization: Bitcoin (BTC), Ethereum (ETH), Tether (USDT), and Binance Coin.

It's important to note that BNB is the native coin of the largest crypto trading exchange by volume in the world, Binance, and of the Binance Smart Chain (BSC). The BSC platform enables smart contracts, which are necessary for DeFi services, and it has low-cost transactions. Those low fees have helped siphon market share away from the current smart contract market leader -- the Ethereum blockchain.

BNB growth drivers: low-cost fees for NFT and DeFi transactions

Earlier this year, the Ethereum blockchain handled more than 95% of NFT and DeFi transactions. However, the Ethereum network still has scalability and congestion issues that won't be resolved until upgrades to the blockchain are in place with the rollout of ETH 2.0.

Given the current limitations on the Ethereum blockchain, it has had difficulty keeping up with the network volume demands from the record-setting growth of NFT and DeFi transactions. As a result, the ETH blockchain allows users to "bid up" the fees to complete a transaction, which I've personally seen in the $100-$200 range to complete a purchase during peak periods.

Those costs -- called "gas fees" in the cryptosphere -- can anecdotally be higher than the value of the actual NFT asset or DeFi transaction itself. The Arcane report cited that the average transaction fee on Ethereum was $21, while it was $3 for Bitcoin fees. Other blockchains such as Binance's, Solana, Polygon, and Energi have fees that are as low as a few pennies.

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Binance Coin going forward

Ethereum still has a lot of market share it can lose, assuming the popularity of NFTs, DeFi, and play-to-earn cloud-based gaming continues to grow. Thus far, the BCS platform has already proven to be a formidable alternative to ETH. Despite its impressive run-up last year, and based on its current market capitalization, BNB still has room to run and could still see three to five times growth this year.

Our Research Expert