On June 7, the price of Binance Coin (BNB) price fell 7.3% to drop below $275, hitting its lowest level in three weeks.
In addition, the price of BNB could fall another 25-40% in 2022 as its parent company, Binance, faces allegations of breaching securities rules and laundering billions of dollars in illicit funds for criminals.
Binance Is in Hot Water
In 2017, Binance raised $15 million in 16 days as part of an initial coin offering (ICO) during which it issued Binance coin (BNB) for $0.15 each to the public as an ERC-20 token on the Ethereum blockchain.
The token behaves as a utility asset within the Binance ecosystem, primarily allowing traders to receive discounts on their trading activities. Simultaneously, BNB also functions as a speculative financial asset. This has caused it to become the fifth-largest cryptocurrency by market capitalization.
As a result, the U.S. Securities and Exchange Commission (SEC) is investigating Binance following allegations it may not have registered its BNB token as a security with the agency.
This is likely to put downward pressure on the price of BNB, which has already lost more than half of its value after peaking in May 2021 at around $700.
Downside risks for BNB also stem from a recent Reuters report that claims Binance processed $2.35 billion in illicit transactions between 2017 and 2020 that allegedly originated from hacking, fraud, and illegal drug sales.
It is the latest set of accusations against the world’s largest crypto exchange, which landed in regulatory hot water last year over its alleged failure by regulators to properly register its business in jurisdictions including the UK, Italy, and Singapore.
Technical Analysis Indicates Further Downside
In addition to the bad news, BNB’s fall is also part of a broader corrective trend elsewhere in the crypto market, with major coins Bitcoin (BTC) and Ether (ETH) dropping 7% and 7.25% on the same day.
Now, BNB is testing the 61.8 Fib retracement level (near $274) of the Fibonacci retracement chart sketched from its $10 low to its $700 high. Interestingly, the same level played a supporting role in the May-July 2021 session that preceded a 170% price rally.
However, weak fundamentals, including the Fed’s hawkish policy, have increased the possibility for BNB to fall below the 61.8 Fib line.
If that happens, BNB’s next downside target could be its 200-week exponential moving average near $200, down about 25% from the June 7 price.
The weekly Relative Strength Index (RSI) for the BNB/USD pair, now at 34, also shows more downside room until the reading hits 30, an oversold level that indicates buying sentiment.
Meanwhile, further decline below the 200-week EMA could cause BNB to consider the 0.786 Fib line near $160 as support, down 40% from the June 7 price.
Conversely, if BNB manages to hold above $274, it could bounce back towards the area defined by its 0.5 Fib line around $355 and its 50-week EMA (the red wave) near $380, up over 20% from the current price point.
Featured Image: Megapixl © Mohammedsoliman4
Ray Schuetz received a Masters Degree in computer science from The University of Texas (Austin). Ray has been working as a full-time blockchain consultant for the past 3 years. In his spare time, Ray enjoys writing for EthereumCryptocurrency.com and other crypto news publications.