Balancer price prediction: DEX surges in value

Balancer, an AMM launched in 2020, surged 40% during a recent 30 day period

A large graphic of Balancer logo against a blue background                                 
Balancer is the 27th largest DEX according to CoinMarketCap – Credit: Shutterstock
                                

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Balancer is an automated market maker, or AMM ,which, despite only being launched in 2020, has managed to climb the ranks to become a frontrunner on the decentralized exchanges scene. 

As the crypto industry has exploded over the past couple of years, the demand for efficient and low-cost platforms where users can trade  cryptocurrencies has also grown. As a result, decentralized exchanges, also known as DEXs, have become the most important emergent start-ups on the decentralized finance landscape.

Decentralized exchanges, of which there are close to 200 according to CoinMarketCap, are now a vital part of the  crypto trading economy. The Ethereum blockchain has become a hotbed for these decentralised exchanges, which come in a variety of shapes and forms.

While some decentralized exchanges follow an order book structure, similar to trading houses in traditional financial markets, many so-called automated market makers, or AMMs, have emerged. An AMM is a program that automates the process of providing liquidity.

The Balancer website says that “Balancer is a community-driven protocol, automated portfolio manager, liquidity provider, and price sensor that empowers decentralized exchange and the automated portfolio management of tokens on the Ethereum blockchain and other EVM compatible systems.”

The native token of the project, BAL, has, despite performing dismally over the past year, began to pick up over March 2022. 

According to CoinGecko, the token has lost 70% since April 2021, but gained 40% in the 30 days leading up to 12 April 2022. 

How does this impact Balancer price predictions? 

Before looking at forecasts, let’s look at how the token works. 

What is Balancer (BAL)? 

Built on Ethereum, the project allows users to trade Ether and ERC-20 crypto assets in a permissionless decentralized environment. 

Users can trade assets against other traders on the platform. Liquidity providers can also earn passive income through adding to and creating liquidity pools. 

High liquidity is a critical part of trading. High liquidity means the market price of an asset will not be compromised when someone is attempting to trade it. 

Initially cryptocurrencies had low liquidity as there were not high enough levels of buyers and sellers, especially for small alt-coins. Liquidity pools, where liquidity providers artificially create liquidity by being paid a fee in exchange for depositing their assets, solved this problem. 

If prices in an automated market-maker diverge too much from market price on other exchanges, traders are incentivised to take advantage of the price difference hrough arbitrage, thus leading back to supposed equilibrium. In a similar fashion to the way other AMMs operate, Balancer routes trades through the pools which secure the best rate for the user. 

Liquidity pools 

Balancer users can invest in shared or smart pools. Users can also create private pools where they can set their own perimeters. Private pool managers can set their own fees, a unique feature of the Balancer platform. 

The platform also supports multi-asset pools where pool owners can put in as many as eight differing assets in their pools. 

According to the Balancer whitepaper: “Pools can aggregate the liquidity provided by several different users. In order for them to be able to freely deposit and withdraw assets from the pool, Balancer Protocol has the concept of pool tokens. Pool tokens represent ownership of the assets contained in the pool. The outstanding supply of pool tokens is directly proportional to the value function of the pool.

“If a deposit of assets increases the pool value function by 10%, then the outstanding supply of pool tokens also increases by 10%. This happens because the depositor is issued 10% of new pool tokens in return for the deposit.”

Another key feature of the platform is the way it rewards traders on the platform with BAL tokens. BAL is also a governance token. 

Who founded Balancer? 

Balancer Lab was co-founded by Fernando Martinelli and Mike McDonald

Martinelli, based in Portugal, is the CEO of the project. He studied engineering at the federal university of Santa Catarina in Brazil. 

He completed an MSc degree in robotics and image processing, according to his LinkedIn in three different universities: Heriot-Watt University, University of Girona and University of Bourgogne. He also completed a MBA in international management at the University of Paris. 

Martinelli worked as a junior consulting group coordinator at NEO Empresarial, an engineering consultancy company in Brazil. 

He worked in the robotics department at Areva, before co-founding PrepLounge in Germany, a company helping individuals prepare for interviews. Before getting involved in Balancer, he co-founded Brasil Mate, a natural energy drink business. 

McDonald studied computer science and was born in the United States. Joining the blockchain community in 2016, he worked on MakerDAO in 2018. He is the CTO of Balancer

How does this information impact Balancer price predictions? 

Let’s look at how the coin has performed recently. 

Balancer coin: recent performance 

The token rose soon after launch, surging on 17 July 2020 from $7.98 to a high of $35.55 by 1 September 2020, CoinMarketCap shows. It dropped soon after, however, falling to a low of $8.13 by 3 November 2020. 

After considerable volatility for the remainder of the year, the BAL token began to explode in January surging to $52.19 on 12 February. The token sunk soon after, hitting $32.11 by 28 February. High levels of volatility persisted into March 2021. It then rose from $45.60 on 24 April 2021 to a record high of $74.77 on 4 May 2021. BAL subsequently dived to $14.58 by 26 June. The token made a recovery soon after, hitting $33.63 by 5 September, before dropping to  $18.78 on 28 September. 

Despite performing badly for the majority of 2022 so far, hitting $10.52 on 14 March 2022, in early April the BAL token rose to $21.75. The token has since dropped, standing at $15.44 as of 12 April 2022.

There is a maximum supply of 100 million BAL and a circulating supply of just under seven million BAL tokens giving the protocol a market cap of $107,214,564. 

How does this data impact BAL price predictions? 

Balancer price prediction: will the token recover? 

While price forecasts are important when it comes to attempting to work out whether a crypto is a good proposition, it is very important to keep in mind that price predictions, especially long-term ones, can invariably be inaccurate.

With this in mind, let’s look at some Balancer coin price predictions

Gov Capital in a bullish forecast, thinks Balancer could go up to $66.43 in a year’s time and $232.412 in five years' time.  

DigitalCoinPrice, in a slightly more modest outlook, thinks the Balancer price prediction for 2022 could average at $20.68.  The platform thinks the Balancer crypto price prediction for 2023 could be $22.72. Its Balancer price prediction for 2025 stands at $31.59, while the website’s Balancer price prediction for 2030 is $71.64. 

Wallet Investor, in a bearish forecast, thinks the token could drop to $2.102 in a year’s time.

FAQs

How many Balancer are there?

There is a maximum supply of 100,000,000 BAL and a circulating supply of 6,943,831 BAL tokens. 

Is Balancer a good investment?

Potentially. Experts on the whole seem to think the token is a good investment with Gov Capital predicting the token could pass $200 in the next five years. 

Saying this, the token has, even with the recent surge, lost 70% since April 2021. 

It is important to always keep in mind that crypto coins are highly volatile assets and that analysts’ forecasts can frequently be wrong.  

Will Balancer go up?

Potentially. Some predict the token will go up, while others forecast the token will go down. 

Always remember, crypto is highly volatile, and gains are generally followed by losses. Never invest any money you cannot afford to lose.

Should I invest in Balancer?

Potentially. While the project certainly has fierce competition in the likes of Uniswap, Curve and Sushi Swap, it does seem to have differentiating features, including incentivisng traders to use the platform by rewarding them BAL. 

Investing is a highly personal endeavour and very dependent on your individual investment goals. Remember to do research and keep up-to-date on any developments in the Balancer ecoystem. 

Further reading

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