Binance USD Price Prediction: Can it beat Tether and USD Coin?

BUSD’s market cap surged in 2021, but can it overtake its stablecoin rivals?

The Binance USD logo in front of a blue price graph                                 
Since launching in 2019, the BUSD market cap has climbed above $14bn. Photo: Shutterstock
                                

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Binance’s stablecoin is looking to bridge the gap between traditional and decentralised finance. The year 2021 proved to be a valuable one for BUSD, as it showed there is demand for another US dollar-pegged stablecoin.

As it is a stablecoin, making a Binance USD coin price prediction is challenging. However, its market cap can offer a good indication of the usage and demand for the cryptocurrency. Will more users turn to Binance USD as their go-to stablecoin?

Binance USD market capiitalisation growth
Binance USD market capiitalisation growth

What is BUSD?

Before making a Binance USD price prediction for 2025 or 2030, it is first important to understand its tokenomics (token economics).

Binance’s stablecoin was designed to remain at $1 and its unique system enables this. Binance has a partnership with the blockchain infrastructure platform Paxos to create BUSD. Paxos holds an equal number of US dollars to the total supply of BUSD, keeping the 1:1 ratio between a US dollar and a BUSD. The circulating supply of BUSD is 14.38 billion at the time of writing: this means Paxos holds $14.38bn.

Every time a BUSD is bought, the equivalent amount of USD is added to the Paxos treasury. When BUSD is sold, dollars are taken from the treasury and the BUSD is burned. This means it is pointless making a Binance USD price prediction for 2030 as the price will be $1. However, the market capitalisation of BUSD is a clear indicator of the token’s demand.

BUSD’s market cap history

The Binance stablecoin launched in September 2019 and by the following month, its market cap had grown above the $10m mark. Binance wanted to position BUSD as the most trustworthy and reliable stablecoin on the market, so winning over regulatory approval was important.

BUSD achieved a major milestone in its first month, it received approval from the New York State Department of Financial Services (NYSDFS), a regulatory body that has been stringent on cryptocurrencies in the past. Although Binance USD’s market cap did not surge over the first year, remaining between $100m and $200m, the NYDFS win was important to give BUSD an upper hand against its stablecoin rivals.

The stablecoin’s market cap began its steady growth in 2021, when it surpassed the $1bn mark in January. By the end of April, it had almost hit $7bn. This came after Binance announced its partnership with BitPay, a bitcoin payment provider. The partnership enabled the company’s merchants to accept Binance USD. Customers were suddenly able to use BUSD to pay for goods on Amazon, Microsoft, and more.

The real world uses for Binance USD did not stop there. On 21 June, MoonPay revealed its platform would support Binance Smart Chain assets, including BUSD and BNB. MoonPay allows users to exchange cryptocurrencies using mainstream payment methods, such as Google Pay, Apple Pay, debit, and credit cards. A few days after this announcement, the BUSD market cap surpassed $10bn.

BUSD’s successful end to 2021

The market cap continued to grow throughout the rest of the year, although at a slower pace. It started to pick up in late December, when it managed to stay above the $14bn mark.  This followed the announcement of two new BUSD pairs: contentos and cortex.

December proved to be an active month for the stablecoin. BitPay announced a new promotion for traders in the United States, allowing them to buy BUSD and other cryptocurrencies without any credit or debit card fees.

The BUSD market cap peaked at $14.65bn on 4 January 2022 and has fallen slightly since then to $14.28bn. Binance USD still remains a respectable 15th place on CoinMarketCap’s crypto rankings.

Binance USD price prediction

As established above, there is not much point in making a BUSD price prediction. Sites including Gov Capital, WalletInvestor and DigitalCoin have a Binance USD price prediction for 2022 unsurprisingly around the $1 mark. For those wanting to make a Binance USD crypto price prediction, it may be more useful to look at its market cap and adoption rates.

There is a consensus from experts that Binance USD will continue to see adoption in the coming years. In the first nine days of January, the number of those holding BUSD increased by a thousand, according to Etherscan.

Nigel Frith, equities trader at AskTraders, expects this trend to continue. “Binance is one of the leading cryptocurrency exchanges, so it is very plausible that its (BUSD) market cap will only continue to grow,” he said.

“The idea of stable coins such as Binance USD has enabled investors to hold on to investments in a more stable currency and provides buyers the reassurance that their tokens will maintain stability and avoid the risk of unpredictability such as fluctuating prices. This reduced volatility and widely popular idea will presumably lead to a higher market cap in the future.”

BUSD’s main competitor is Tether (USDT), a stablecoin that is currently ranked third on CoinMarketCap. Bybit Learn said USDT is not the best stablecoin due to its lack of transparency, and others will eventually prove to be a favourable alternative.

It wrote: “USDC and BUSD have greater transparency than USDT. Moreover, they’re comparable to USDT in terms of the exchange rate and blockchain. Thus, USDT is a better pick for people who prefer investing in a cryptocurrency with a higher volume and liquidity, while USDC and BUSD are preferable if you value transparency.”

The Insider also argues Tether is feeling pressure, this time because of its reserves. A 2021 report found almost half of its reserves was commercial paper, also known as short-term debt that is issued by companies to raise funds. The rating claims to be safe and “cash equivalent”, but this can sound risky to some investors.

If Tether does buckle under the pressure and investors move to BUSD’s more transparent stablecoin, this could lead to Binance USD’s market cap growing even further.

An S&P report found prioritising transparency to be important as it could affect the financial system stability. With BUSD’s approval from NYDFS, it seems to be in a good position for a future where regulation and transparency are increasingly important.

Binance USD has another advantage for those looking to make a BUSD price prediction. It has the backing of Binance, the largest crypto exchange. This gives BUSD an edge over its rivals as the exchange is driving adoption. For example, in October 2021 Binance launched a $1bn fund to drive digital assets and blockchain adoption.

Binance USD may have the backing of the largest exchange and the approval of NYDFS, but there is still a long road ahead of it. Tether and USDC are both stablecoins with more than three times BUSD’s market capitlisation. As the tokenomics are built around demand, driving adoption of BUSD will be key to its future.

FAQs

It might be. Binance USD is a stablecoin so investors will unlikely be able to profit off its volatility. However, investing in BUSD can offer a safe haven during a bearish crypto market. Remember, you should always do your own research before deciding to invest.

The price of BUSD is unlikely to go up as it is a stablecoin, meaning its goal is to remain at $1. On the other hand, its market cap has surged this year and could continue growing if more choose it as their go-to stablecoin.

It depends. Binance USD has the backing of the largest crypto exchange and the approval of a crypto-stringent regulatory body. But, there are stablecoins such as Tether and USD Coin that offer more liquidity as their market cap is three times the size of Binance USD. Remember you should always do your own research and never invest more than you can afford to lose.

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