It's possible that BNB Chain will rally again after a 24% surge, with the fundamentals strong enough to back that

Key points: 

• After an impressive 23.7% rally between Oct. 25 and 31, Binance’s BNB token faced a strong rejection at the $330 resistance.
• To understand if the recent 6% drop is a warning of a deeper correction, traders should look at network usage from a deposit and user perspective.
• BNB Chain’s main DApp metrics showed weakness in late July after its TVL fell below 22.5 million BNB. Recently, TVL dropped to 18 million BNB, close to the lowest level since April 2021.
• Compared to similar smart contract platforms, BNB Chain's TVL was least affected, with the number of active addresses interacting with most DApps exceeding 40,000 in 8 cases. Ethereum, on the other hand, has only amassed five DApps with 40,000 or more active addresses during the same period.
• The above results show that the BNB chain is aligned with competing chains, which supports the recent BNB rally. Therefore, the data should be seen as a positive for BNB investors and diminish the possibility of further price corrections.

After an impressive 23.7% rally between Oct. 25 and 31, Binance’s BNB token faced a strong rejection at the $330 resistance. Could the 6% sell-off from the $337.80 high for two days be a sign of more trouble?

Let's see what the data shows.

Analysts linked the recent rally to the Oct. 28 news that Binance had invested $500 million in Twitter. However, metrics for online deposits and decentralized applications (DApps) were not accompanied by an improvement in sentiment.

The strong rise was largely based on reports that Binance was preparing to help Twitter root out bots. The speculation came after billionaire Elon Musk raised the $44 billion needed to buy the social media platform.

In absolute terms, BNB’s year-to-date performance reflects a 40% decline, but is ahead of its peers, as Ether is down 59%, Solana SOLana is down 82%, and Polygons MATIC posted a 79% correction.

To understand if the recent 6% drop is a warning of a deeper correction, traders should look at network usage from a deposit and user perspective.

BNB TVL falls less than peers

In general, analysts tend to overemphasize the Total Value Locked (TVL) metric. While this may be relevant to the decentralized finance (DeFi) industry, it is rarely needed for crypto games, non-fungible token (NFT) markets, and gambling and social applications.

BNB Chain’s main DApp metrics showed weakness in late July after its TVL fell below 22.5 million BNB. Recently, TVL dropped to 18 million BNB, close to the lowest level since April 2021.

In dollar terms, the current TVL of $5.9 billion is the lowest since Aug. 11. According to DefiLlama, this figure represents 10.9% of the total TVL of the cryptocurrency market.

Still, the 5% monthly TVL contraction is lower than that of its smart contract network rivals. For example, the TVL of the Ethereum network fell by 13% in ETH over the same period. Solana's network TVL is down 22% in SOL and Polygon's network TVL is down 19% in MATIC.

DApp usage also underperforms compared to competing chains

To confirm whether the TVL drop on the BNB chain is a problem, other DApp usage metrics should be analyzed.

Data from DappRadar as of Nov. 2 shows that the number of BNB chain network addresses interacting with decentralized applications fell by 5% month-over-month. In contrast, Ethereum fell 5%, while Solana users fell 13% over the same period.

Compared to similar smart contract platforms, BNB Chain's TVL was least affected, with the number of active addresses interacting with most DApps exceeding 40,000 in 8 cases. Ethereum, on the other hand, has only amassed five DApps with 40,000 or more active addresses during the same period.

The above results show that the BNB chain is aligned with competing chains, which supports the recent BNB rally. Therefore, the data should be seen as a positive for BNB investors and diminish the possibility of further price corrections.