Binance USD (BUSD) is one of the most popular stablecoins in the industry. Many traders regularly swap BUSD for BNB.
This prevalence couldn’t be possible without a promotion by the world’s largest crypto exchange — Binance. Moreover, after the conversion of all stablecoins on Binance into BUSD (apart from USDT), the share of this coin will grow significantly.
Binance USD Overview
BUSD is a dollar-backed stablecoin. It is issued by the Binance exchange, with Paxos as a partner. The token is verified by the New York Department of Financial Services. Monthly audit reports for BUSD are posted on the official website. The Binance USD token was launched on September 5th, 2019.
This is digital fiat money issued in the form of an ERC-20 token and compatible with the BEP-20 standard. This means that the token can be used for transactions, payments, and locking in Defi.
In addition to the protective function inherent in stablecoins, BUSD holders have the opportunity to trade on the Binance exchange with lower fees and even earn by providing liquidity through the Binance Liquid Swap. The scope of this asset is not limited to these functions alone.
Using Binance USD, you can:
- Make transfers in digital dollars, with low commission fees. This is especially important when it comes to cross-border transfers.
- Use it in many trading pairs, including decentralized exchanges.
- Secure collateral, margin positions, and lending.
This stablecoin is great for safely storing your savings on wallets and exchanges.
How BUSD Works
The value maintenance mechanism of BUSD is quite simple compared to some other stablecoins. Each BUSD can be exchanged for the dollar used to back it. The user only needs to send BUSD to the Paxos wallet to receive fiat currency. Paxos, for its part, will transfer dollars from the account to the client and burn the BUSD received from them.
If the price of BUSD falls below the dollar, arbitrage traders step in and buy large volumes of BUSD and then convert it to dollars through Paxos. For example, if BUSD falls to $0.98, it will be possible to buy up cheaper tokens and send them to Paxos, which will secure a whole dollar for each such token.
The number of dollars needed to cover it is kept in American banks. This amount is a reserve that is insured by the Federal Deposit Insurance Corporation (FDIC) and the US Treasury.
Initially, Paxos placed BUSD on the Ethereum (ERC-20) blockchain. In addition, the Binance exchange itself provides the opportunity to use BUSD on the personal BEP-20 network blockchain, which is cheaper and more convenient for transfers.
Binance is committed to the coexistence and legalization of its activities within various jurisdictions. In this regard, there is a function in the BUSD code, with the help of which the exchange will be able to freeze any balances in BUSD if there is an official request from the authorities.
BUSD Price Prediction
Despite the initial goal of stablecoins (they aren’t supposed to grow), there are a number of opinions regarding its future.
TradingBeasts is sure that BUSD can strengthen its position in the crypto ranking in the future. Currently, it has the seventh-biggest market cap in the entire industry. And after conversion, the capitalization of stablecoin may reach $30 billion.
This prediction platform also thinks the BUSD rate won’t change much. It is clear that the main asset holder is the Binance platform itself, which should ensure the smooth operation and exchange in all directions of the token, but this issue is of concern to many cryptocurrency owners. If something goes wrong with the exchange, then it can negatively influence the stablecoin. However, at the moment, everything is stable and the platform is trying to keep BUSD in the lead.
WalletInvestor is also sure that there will be no de-peg. Even a 2% decrease in the price is unlikely. The lowest price for BUSD by 2025 will be $0.99 and the maximum is $1.009.
Overall, experts are confident that Binance USD is the #1 competitor to USDT.
Summing It Up
Is BUSD a good investment? Yes, especially as it can be bought at Godex as well. Issued by the most famous and most visited exchange in the world, recognized by the New York State Department of Financial Services, Binance USD is a reliable protection for your investments.
Bob Andrews is a content editor for Landscape Insight, With a background in journalism, Bob brings a unique perspective to his role as he oversees the creation and publication of a wide range of content, including articles, podcasts, and videos.