Following the surge of meme coin activity on BNB Chain, Binance founder Changpeng Zhao (CZ) has sent out a clear warning to the community stating that perpetuals on BSC chain might be a source of high risk and volatility. His remark coincides with a surge in activity around meme coins on the BNB Smart Chain (BSC), where conjecture is quickly escalating.
Tokens based on BNB Chain are currently being traded with up to 25x leverage. Previous speculative cycles, in which sharp increases were followed by equally quick corrections, are somewhat similar to the current trend of rising meme coins.
Market participants face significant risk as a result of the increased activity, even though it gives the BNB Chain liquidity and visibility. Sharp price swings are unavoidable in this environment because newly issued meme assets are subject to perpetual contracts with high leverage. Unprepared traders may experience significant liquidations and have their gains swiftly erased by this degree of volatility. Users must exercise caution, as CZ’s warning emphasizes.
The current surge is mostly based on speculative hype rather than fundamental value even though the BNB Chain stands to gain from the increase in trading volume and engagement. Assets associated with this trend may experience steep drops if sentiment shifts or liquidity contracts. From a network perspective, BSC’s market presence can be improved by the rising popularity of leveraged products and meme coins.
Related
However, the credibility and valuation of BNB itself may be weakened if these trends become unsustainable or create systemic risk. Even though there are high-reward opportunities associated with the current meme coin frenzy on BSC, there is also a high risk. As suggested by CZ, this area is not for beginners. Traders have to balance the risks of abrupt market reversals and volatile price action against the possibility of profit.
