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Nansen: Big Investors Are Behind Binance Smart Chain Growth

Analysts at Nansen argue that large investors, not retail traders, are behind the rapid rise in popularity of Binance Smart Chain.

The rapid growth of Binance Smart Chain (BSC) was driven by the activity of large investors, not retail investors, according to a new report from analyst firm Nansen. The company’s analysts came to this conclusion based on blockchain data, including information about active addresses, many of which Nansen has marked as belonging to large traders.

For example, stablecoin transactions worth at least $ 1 million accounted for over 90% of total stablecoin transfers in April, when the popular decentralized exchange (DEX) PancakeSwap saw a surge in activity. In August, these large wallets still carried around 30-40% of total stablecoin trading volume.

The addresses that Nansen has labeled as “smart money” include those of traders who have made more than $ 100,000 in profit from providing liquidity and mining liquidity in Decentralized Finance (DeFi) protocols. These addresses also include the wallets of public companies that invest in cryptocurrency and have shown an increased interest in BSC.

As shown in the chart below, up to 7.4% of the money was in both BSC and Ethereum. At the same time, almost 50% of “Flash Boys” or wallets that made several DEX trades in one profitable transaction were active in both BSC and Ethereum.

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“Interacting with smart money is one possible positive indicator of a project or protocol,” Nansen says. “While there are some negative attitudes towards BSC, the data shows that a fairly significant number of smart money addresses have been deployed in both BSC and [Ethereum]».

Nansen’s findings contradict the popular belief that the success of BSC, the network launched by Binance exchange, was spurred by retail investors looking to lower transaction fees. In the first half of the year, BSC gained popularity over Ethereum due to its low fees, and became one of the largest blockchains for decentralized applications as transactions in Ethereum became too expensive.

“On average, the gas price in BSC is only 10-20% of the gas price in Ethereum,” Nansen analysts said. “This has made BSC attractive, especially for retail investors and developers who don’t have to worry about high transaction fees affecting the app’s popularity.”

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Nansen analysts highlight the role that large investors have played in the success of BSC, but question how BSC will “evolve and work to strengthen its market position” as competition from tier 1 blockchains intensifies.

Recall that back in the spring, Messari analysts warned about the centralization of the Binance Smart Chain (BSC) network due to the influence that Binance Chain has in choosing BSC validators.

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