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Binance announces the burning of nearly $600 million worth of tokens in the fifteenth quarter, how will it drive profits in the first quarter? Reasons for the lack of increase in BNB?

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Binance announces the burning of nearly $600 million worth of tokens in the fifteenth quarter, how will it drive profits in the first quarter? Reasons for the lack of increase in BNB?

Two days after Coinbase went public on Nasdaq, Binance announced the fifteenth quarterly BNB token burn, totaling nearly $600 million. How should we interpret this event? It is not surprising that BNB fell instead of rose.

First Look at the Details of the 15th Quarter BNB Burn

Binance announced the 15th quarter BNB burn on the afternoon of April 16, burning 1,099,888 BNB, valued at $595,314,380.

Transfer Transaction / Burn Transaction

Compared to the previous quarter, BNB has seen a significant price increase. In the 14th quarter burn on January 19, 2021, BNB was only around $45.8, burning 3,619,888 BNB, valued at approximately $165,791,000. It was the highest value and largest burn quantity in history at that time.

In the 15th quarter, BNB has surged significantly over the past three months, valued at $540, a 1179% increase from the first quarter, resulting in a reduced burn quantity.

What Does the Burn Quantity Represent?

In the old version of the BNB whitepaper, burning represented "buyback," as stated:

"We will use 20% of the profits to buy back BNB and burn them until 100 million BNB are burned, accounting for 50% of the total supply."

However, this method was later criticized for having "securities-like" characteristics and potential legal risks, leading to the removal of this description. The new burn now vaguely states it is "based on trading volume," without specifying the exact ratio. Therefore, people cannot deduce Binance's quarterly profits based on the amount of BNB burned.

Old and New Whitepapers

Is There a Way to Estimate Profits?

FTX Exchange founder SBF estimated Binance's Q1 profits using this method, subject to discussion:

Binance's trading volume in the first quarter was approximately $6 trillion, with an average fee of about 0.016%. This translates to revenue of around $1 billion (60,000 billion * 0.016% = $9.6 billion). In other words, SBF believes the total value of the BNB burned this time is about $600 million, equivalent to Binance burning 60% of its trading volume revenue.

However, Binance's fee rates range from 0.012% to 0.1%. SBF did not provide detailed explanations for using the lower fee rate of 0.016% as the average, so this method of estimating profits is likely distorted.

Another rough estimation is: "Assuming the burn mechanism remains the same," where 20% of the profits are used for burning, the $600 million burn amount / 20% = $3 billion, an estimate based on the old system of profits calculation.

Comparing to Coinbase's situation, Coinbase's first-quarter trading volume was $335 billion, with a net income of $8 billion (Coinbase's base fee rate ranges from 0.04% to 0.5%, with additional revenue sources, yielding a gross margin of approximately 0.238%. Binance's fee rate ranges from 0.012% to 0.1%, assuming a gross margin about one-fifth of Coinbase's, based on Binance's first-quarter trading volume of $6 trillion, 60,000 billion * 0.00238/5 = $28.56 billion (comparable to Coinbase's gross margin calculation).

The result of this calculation is very similar to the calculation based on the old whitepaper.

This calculation method does not exclude factors such as different operating costs of the two exchanges, distribution of revenue based on fee rate tiers, etc., and is only a rough estimate for reference.

BNB Not Surging, No Surprise

In fact, BNB has not experienced significant surges after past burns. This time, coupled with the burn schedule coinciding with Coinbase's listing, was a "expected giveaway." Since 2021, before Coinbase's listing, BNB had already surged many times over. The upward momentum from the burn is likely driven by the demand for BSC staking, liquidity pools, IFOs, gas fees, etc. However, after months of price surges, the cost of use has decreased, and the demand has been largely met. With Coinbase's stock price not performing exceptionally well, BNB may not see a significant surge in the short term, as expected.