Should You Borrow $BNB to Participate in a Binance Launchpad?

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    The Datafi
    Published on
    · 3 min read
  • Binance launchpads have gained a reputation for having a significant impact on various projects, with their 29th launchpad, Hooked Protocol, attracting much attention. We will talk about the potential profitability of borrowing $BNB through lending protocols in order to join Binance Launchpad projects.

    - To participate in a Binance launchpad, an individual must hold a certain amount of $BNB, which can be purchased or borrowed through lending protocols.

    - Borrowing $BNB through lending protocols (e.g. Venus) to participate in a launchpad involves risk.

    - Weighing potential risks and rewards before borrowing $BNB is crucial for informed decision-making.

    Project listings on Binance launchpads have been associated with exponential growth, as demonstrated by the massive increase in value of assets such as AXS (1500x), MATIC (1000x), and EGLD (460x). The launch of Wild Cash, the first dApp on Hooked Protocol, also saw a rise in its daily active users by 40%.

    To participate in a Binance launchpad, an individual must hold a certain amount of $BNB, with an average $BNB balance being required over a 7-day period. This can lead to an investor having to purchase $BNB, despite the potential risk of price decrease.

    An alternative to purchasing $BNB is borrowing through lending protocols, such as Venus. On-chain data from November 23rd showed that 90% of $BNB on Venus was being borrowed, indicating the high demand for $BNB in the lending space. However, it is important to consider two factors when deciding to borrow $BNB through lending protocols: the lending interest rate and the launchpad allocation.

    The lending interest rate on Venus is directly correlated with its utilization rate, with higher lending resulting in a higher interest rate. At a 94% lending interest rate, the borrow annual percentage yield (APY) reached 60%, meaning an additional 1.15% would have to be paid on a 7-day $BNB loan. Additionally, previous launchpad allocations have returned an average of 0.08% to 0.1% on a $100 investment in $BNB.

    Taking these factors into consideration, the return on investment (ROI) for borrowing $BNB through lending protocols can range from -0.4% to 1.85%. This suggests that there is still a risk of loss associated with this approach.

    In conclusion, before deciding to borrow $BNB through lending protocols in order to participate in a Binance launchpad, it is crucial to weigh the potential risks and rewards. By carefully considering the lending interest rate and the launchpad allocation, individuals can make a more informed decision regarding the profitability of this approach.

    BNB is Binance's native token, used for paying trading fees on the platform, participating in token sales on Binance Launchpad, and more. It has become a popular and widely-used cryptocurrency due to its utility and strong association with the leading Binance exchange.