Binance Dual Investment is a great way to earn passive income no matter which direction the market goes. You have the chance to hedge a fixed price, but also profit from the relative price distances of two cryptocurrencies.
What is Binance Dual Investment?
The currency you will get back is dependent on the outcome of your bet at the delivery date. With an Up-and-Exercised BTC product, if the price of the underlying asset increases so that your earnings exceed the predetermined price (strike price), your investment will be converted into the alternate currency (BUSD) at the strike price. If the price of the underlying asset doesn’t exceed the strike price, you’ll still get yield on your deposited cryptocurrency.
With a Down-and-Exercised BUSD or USDT product, if the value of the underlying asset is above the strike price on the delivery date, you’ll get your deposited crypto back plus yield. If the price of the underlying asset doesn’t exceed the predetermined strike price, your investment will be converted into the alternate currency at the strike price along with your interest.
Before we get into how these products work, let’s clear up some of the terms you’ll need to know.
- Delivery date – This is when you can redeem your crypto with the interest that you earned.
- Strike price – The price threshold that determines which settlement currency you’ll get paid in. This price is fixed at a predetermined level upon entering a Dual Investment product.
- Settlement price – The spot price of the underlying asset at 08:00 (UTC) on the expiry date.
- Annual percentage yield (APY) – The interest you’d earn if you’d lock your crypto in a Dual Investment product for a year, including compounded interest. For example, if your APY is 36.5%, then an estimation of your daily effective return is 36.5% / 365 days =0.1%.
- Underlying asset – The reference asset in a Dual Investment product. For example, if you deposit BUSD and bet on BTC’s price to go lower, the underlying asset is BTC. The Strike price, Ref. Spot price and Settlement Price are all tied to the underlying asset.
How does BTC Dual Investment work?
The BTC Dual Investment product lets BTC holders hedge their bitcoin holdings. Up-and-Exercised products give users a chance to sell the underlying asset with interest at a relatively high price at the time of delivery.
With an Up-and-Exercised product, if the settlement price is higher than the strike price, the product is settled in BUSD and is considered “exercised”. On the other hand, if the settlement price is lower than the strike price, the product is settled in BTC.
Down-and-Exercised products work oppositely. If the settlement price is lower than the strike price, the product is exercised and settled in BTC. If the settlement price is higher than the strike price, the product is settled in BUSD.
BUSD & USDT
BUSD & USDT
Settlement price ≥ strike price
Settlement price ≤ strike price
Any time of the week
Always changing, but locked in once the subscription is completed.
When your Up-and-Exercised BTC product is exercised, your asset is converted into BUSD at strike price as the conversion rate. So how are the interest rates calculated for this product? The APYs displayed fluctuate and are based on the strike price, remaining days, and price volatility. However, your APY will lock in once you’ve subscribed to a Dual Investment product.
How does this work in practice? Let’s say you have 1 BTC and the current BTC reference spot price is $38,555. You want to subscribe to the top Up-and-Exercised Dual Investment product outlined below. The strike price is set to $43,000 with a 37.60% APY.
After clicking the [Subscribe] button, you’ll see more details on the product and your possible returns. If you type in 1 BTC, the outcomes are displayed underneath.
16 days later, one of two things will happen:
- If the BTC final settlement price is above or equal to $43,000, your 1 BTC is paid out at $43,000 plus the extra interest. You now have $43,752.50 BUSD.
- If the BTC final settlement price is below $43,000, you’ll get your 1 BTC back plus interest worth 0.0175 BTC. You now have 1.0175 BTC.
How does BUSD/USDT Dual Investment work?
The stablecoin-based Dual Investment Down-and-Exercised products give users a chance to purchase the underlying asset with interest at a relatively low price at the time of delivery. If the product exercises, your stablecoins will convert to BTC at the agreed-upon strike price.
Let’s say you have 10,000 USDT and the reference spot price of 1 BTC is $38,555. You subscribe to a 16-day Down-and-Exercised Dual Investment product with a 69.53% APY. The strike price is set to $37,000.
After clicking the [Subscribe] button, you can see the details of the Down-and-Exercised product and the outcomes.
16 days later, one of two things will happen:
If the final settlement price of BTC is above $37,000, you get your 10,000 USDT back plus interest worth 323 USDT. You now have 10,323 USDT.
If BTC is below or equal to $37,000, your 10,000 USDT is paid out in BTC at a price of $37,000 plus extra interest. You now have 0.279 BTC.
How are the returns calculated?
The returns you receive are based on whether your Dual Investment product is exercised and your invested currency is converted to the alternate currency. With Up-and-Exercised, your product is exercised when the settlement price ≥ strike price. If the settlement price < strike price, the product is not exercised. For Down-and-Exercised investments, the conditions are the other way round.
When your product is exercised, you will receive your original subscription amount and the interest both in the alternate currency. The strike price will be used as the conversion rate. Here are the full calculations for both types of Dual Investment:
(Subscription Amount * Strike Price) * [1 + (APY% * Deposit Days / 365)]
(Subscription Amount / Strike Price) * [1 + (APY% * Deposit Days / 365)]
When your product is not exercised, you will receive your original subscription amount and interest in the deposited currency. Your returns will be according to this formula:
Subscription Amount * [1 + (APY% * Deposit Days / 365)]
How to use Binance Dual Investment
2. Select the product you’d like to subscribe to.
3. Input the amount you would like to invest.
4. Click on [Subscribe].
Binance Dual Investment allows you to earn passive income no matter which direction the market goes. If you’re an investor or trader that wants to do more than stake or lend your HODLed coins, you can bet on price directions and try to hedge market-beating prices with added interest. As always, make sure you complete your own research on the topic before investing your funds.