March 22, 2022
BNB - 22 March 2022 - Dopex Community Token AnalysisCommunity-Analysis-Series
BNB - 22 March 2022
The Dopex Community Analyst series is a series of strategies, ideas, opinion pieces and educational resource written by independent contributors from the Dopex community. Every month many knowledgeable community analysts share a short analyses of a coin of their choice and share these with Dopex. The goal of these articles is to empower the community and help Dopex increase SSOV volume & deposits. With these articles we hope to provide users with additional information that will help them in making an informed choice of strategy using our products.
Without further ado let’s jump into our next article.
BNB + Dopex Strategy
In this article, we will explore what BNB is, and how we can trade it in combination with using Dopex!
What is BNB?
Binance Coin (BNB) is a token created by Binance back in 2017. Currently, it is the 5th largest crypto currency in market cap. It is mainly used as a utility token, which allows users to:
- Receive discounts on their trading fees on the Binance exchange
- Trade against other tokens in the Binance exchange
- Pay for gas on the Binance Smart Chain
- Upgrade Binance account tier- “Users with account balances in BNB and 30 days accumulated trading volume above certain thresholds are given VIP tiers with additional fee discounts and perks”
Quick Stats (as of 3/5/2022)
- Price: $384.46
- Circulating supply: 168,137,035 BNB
- Total supply: 168,137,035 BNB
- Circulating supply valuation: $64,660,662,407
- Largest liquidity pool: Binance / FTX / HitBTC
Why care about BNB?
BNB is used in the Binance Smart Chain ecosystem similarly to how ETH is used in Ethereum’s ecosystem. In decentralized finance (DeFi), users use TVL or “Total Value Locked” (the overall value of crypto assets deposited in a DeFi protocol) as a key metric for gauging interest in that specific ecosystem. As it stands, the Binance Smart Chain is currently the third largest DeFi ecosystem in crypto!
Position & Analysis
Due to on-going global events and their bearish effect on our markets, many traders and investors have sold portions of their assets into stable coins to protect them from further downside, and are not too eager to bet on upside as they have been last year – however positive resolutions to these global events could very much cause another bullish surge. Buying back in those moments yields big rewards, as we have seen post covid crash. This is what we can call a “news driven environment”. We could say that market participants are staying very vigilant! Keeping this in mind, our bias is neutral for the month of March. Our goal is to preserve our capital and only take on a trade if the risk:reward is clearly defined and favorable.
We can simplify the recent price action to being a “range”.We typically see this amidst uncertain market conditions.
Study the range as a Patrician
In a range we have:
- Range High: A relatively high price point that we can’t quite break above
- Range Low: A relatively low price point that we can’t quite break below
- Mid Range: A point in the middle that acts as an equilibrium
Some notes about the mid range
- When price accepts the mid range from below, traders typically flip bullish towards the
- When price accepts the mid range from above, traders typically flip bearish towards the
It is ideal to sell/short BNB when price approaches the range high – and buy/long our BNB when price approaches the range low. Price at the mid range also gives opportunities to long/short, albeit with tighter invalidations.
For BNB, our range high is $435~, our mid range is $385~ and our range low is $340~
By doing this, we have well defined risk to reward. When we buy at the range low, we can catch a +30% move to the range high. If price breaks below the range low, our analysis is invalidated, so we can cut the trade for a small loss. If we buy at the range low, and set a stop loss @ $320 Our overall risk:reward ratio is close to 5:1.
We will be nimble in our positioning, and execute trades with the trade range in mind.
- If price is at the range high ($435), we will SELL/SHORT and set a stop loss at $450, our
targets being the mid range at $385, and range low at $340
- If price is at the range low ($340), we will BUY/LONG and set a stop loss at $320, our targets
being the mid range at $385, and range high at $435
Additional trade ideas that take on more risk:
- If price is at the mid range coming down from near the range high, we can short, setting a
stop loss 5% away from our entry
- If price is at the mid range coming up from near the range low, we can long, setting a stop
loss 5% away from our entry
If taking a trade at the mid range, we will use what is called a trailing stop loss. If the price moves in favor of our trade, we will adjust our stop loss so that our position ends in profit. It is also recommended to apply this same technique for trades at the range high/low as well! Prices tend to be more uncertain in direction at the middle, so we take extra caution there.
So, where does Dopex come into play in all of this?
We can buy call options!
Call options are a fantastic way to be exposed to upside, while taking on less risk. We could essentially reduce our exposure to the underlying (in this case BNB), and buy cheap calls to increase our upside.
Dopex currently offers calls with two strike prices that align very well with our trade strategy. We are very interested in buying the $360 strikes if BNB hits our range low!
Buying a call option when BNB is at our range low @ $340 for strikes @ $360 would cost us around $12. If BNB returns back to the mid range at $385, each option would net us around a 100% return.
In summary, let’s briefly look at the various outcomes based on our strategy
Base Case Scenario:** Price continues to range, hits either our range high or range low, where we short/long respectively while utilizing trailing stops, we come out in profits
Bad Case: BNB falls into our bids at the range low, where we long and purchase calls for $360, however price continues to fall, hits our stop loss at $320 and our calls expire worthless
Good Case: BNB falls into our bids at the range low, where we can long and purchase calls for $360. Price then continues into the mid range where we can take nice profits, and our calls expire in profit.
TL;DR Thread: https://twitter.com/0xspecialist/status/1504999619956248577
Views expressed in this article are the author’s own and not reflective of the position or professional views from Dopex.io.
Dopex reimburses analyst contributors with a small payout to partially compensate the time spent on research and writing. For questions feel free to jump into our discord (discord.gg/dopex) and chat with the team or analyst contributors directly.
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