3 Reasons BNB Price Risks Another 30% Drop by January

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BNB (BNB), the native token of crypto exchange Binance, is threatened with a major price correction in the coming weeks, based on a mix of technical and fundamental indicators.

BNB triangle breakdown continues

From a technical perspective, the BNB has entered the breaking down phase of its multi-month ascending triangle pattern, a trend continuation indicator. The breakdown could last until the price reaches the level which is at the length equal to the maximum height of the triangle.

In other words, BNB’s ascending triangle breakdown target is near $170, down about 30% from current price levels, as shown below. The BNB/USD pair could fall to this level by January 2023.

Three-day BNBUSD price chart with ascending triangle breakdown. Source: Trading View

For now, BNB’s breakdown move appears to be stalling near $222, which has served as a strong support level in recent history, including declines seen following the Terra collapse ( LUNA) in May 2022.

BNB may retest $222 as support, based on a rising wedge technical setup forming on the four-hour chart, as seen below.

BNB/USD 4H price chart with rising wedge breakout pattern. Source: TradingViewBNB Shorts Gaining Momentum

BNB’s bearish technical setup receives further hints from an increasing number of short positions.

Notably, BNB’s price decline seen in recent days coincided with an increase in its open interest (OI), which reached over $415 million on December 18, its highest level since November 2021. the OI and a drop in price suggest that traders opened new short positions in the BNB market.

BNB/USD daily price chart against global open interest. Source: Trading View

Wick, an options trader-analyst, said BNB could be in “big trouble” if Bitcoin (BTC) falls further. The daily correlation coefficient between BNB and BTC has been mostly positive throughout their history.

“First target is $197,” he tweeted.

Binance insolvency fears drive exchange withdrawals

From a fundamental perspective, BNB looks weaker due to growing legal issues at its parent platform Binance. Binance could face potential criminal charges regarding money laundering and sanctions violations.

Related: Binance.US Set to Acquire Voyager Digital Assets for $1 Billion

Moreover, the FTX debacle has also created investor skepticism towards Binance. Many believe that, like FTX, Binance may have used BNB as collateral for loans. While Binance denied such rumors, its clarification did little to help BNB halt its downward trend.

BNB/USD daily price chart. Source: Trading View

Additionally, growing uncertainty prompted customers to withdraw $3.6 billion worth of cryptocurrencies in a week, according to data revealed by Nansen on Dec. 13. The exchange later halted withdrawals from USD Coin (USDC), a stablecoin backed by rivals Circle and Coinbase, which fueled rumors that it could become insolvent.

Bitcoin balance on Binance. Source: Glassnode

On Dec. 14, Binance CEO Changpeng Zhao downplayed insolvency risks by noting that the exchange saw larger drawdowns during the Terra and FTX crashes, adding that their ability to meet withdrawal requests indicated healthy “stress tests”.

“Now the deposits are coming back,” Zhao said.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

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