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Multi-Assets Mode: How It Works and What You Need to Know

2021-05-31

Key Takeaways:

  • Multi-Assets Mode enables traders to share their margin across USDT-Margined and BUSD-Margined contracts. 

  • The shared margin feature is ideal for traders to arbitrage between the two markets without the need to maintain multiple accounts or margins.

  • With Multi-Assets Mode, traders can now diversify their stablecoin exposure between BUSD and USDT.

USDⓈ-Margined Futures contracts have grown in popularity over the past year as they are easy to use and provide flexibility to trade on multiple markets. On Binance Futures, traders can collateralize USDT or BUSD to trade across various futures contracts without buying their underlying cryptocurrencies.

When trading futures with USDⓈ-Margined Contracts, you must allocate a significant portion of your portfolio to USD-pegged stablecoins like  USDT or BUSD to ensure that you hold enough collateral to meet the margin requirements. 

This creates an inconvenience as users must hold the two types of stable assets in their wallets. To solve this problem, Binance Futures launched a new feature to help users increase their capital efficiency, called Multi-Assets Mode. 

What Is Multi-Assets Mode?

Multi-Assets Mode allows users to trade USDⓈ-M Futures across multiple margin assets. Presently, Binance Futures offers USDT-Margined and BUSD-Margined contracts under the USDⓈ-M Futures product line. With the newly launched Multi-Assets Mode, users will be able to share their margin across USDT-Margined and BUSD-Margined contracts. 

Multi-Assets Mode can help lower margin requirements drastically for hedged positions. 

For example, if a position in the portfolio is netting a positive return, it could offset the liability of a losing position in the same portfolio. This would reduce the overall margin requirement that is necessary for holding a losing futures position. Thus, the margin balance only reflects the net P&L between positions in the two markets. This new feature only supports the Cross Margin Mode.

Why Trade BUSD-Margined Contracts?

BUSD is a USD-denominated and fully-backed stablecoin, pegging each BUSD to 1 USD. It offers faster ways to fund your trades and is acceptable as a medium of exchange, store of value, and payment method across the global crypto ecosystem.

If you hold large sums of stablecoins, a split between BUSD and USDT might be a good idea for diversification, convenience, and overall trading strategy purposes.

Benefits of Multi-Assets Mode: Diversification and Increased Capital Efficiency

Users can diversify across various stablecoins and increase their capital efficiency by using the Multi-Assets Mode. With this feature, users can share their margin across USD-Margined products available on Binance Futures; this is particularly useful when opening positions in the two markets.

Let’s run through a quick example. Assume that you are holding a long-term position of 10,000 BUSD worth of BTCBUSD Perpetual Contracts at $50,000 each. 

You predict a temporary pullback in Bitcoin and want to hedge the expected downside risk with a USDT quarterly contract. To hedge, you sold 5,000 USDT worth of BTCUSDT quarterly futures at $50,500 each. 

Let’s assume that your prediction came true, and Bitcoin dropped by 20%. As a result, your position in BTCBUSD perpetual shows an unrealized loss of -2,000 BUSD. But  because you’ve hedged half of your long-term position, profits from the short hedge, which amounts to 1,010 USDT, offset the losses in BTCBUSD Perpetual. Your margin balance is less impacted despite the sharp pullback in prices, reducing the probability of you facing liquidation. 

Additionally, the shared margin feature allows traders to arbitrage between the two markets without the need to maintain multiple accounts or margins. Traders would simply deposit margin either in USDT or BUSD in their wallets and can use the same margin asset to open positions in both markets. 

What Happens When You Have a Large Amount of Negative Balance?

Under the Multi-Assets Mode, when the Asset Wallet Balance (total net transfer + realized profits + net funding fee - commissions) is less than a given threshold, all other stable assets in the USD-Margined Futures wallet will be automatically converted as margin to cover the deficit. This is also known as Auto Exchange. 

For example, if you have a wallet balance of 5,000 USDT and a -1,000 BUSD balance, this will trigger auto exchange. In this case, the exchange will convert approximately 1,000 USDT to BUSD to cover the deficit. 

Auto exchange happens periodically, and if the wallet balance of any asset is lower than the Auto Exchange threshold, the system will convert the user's surplus assets in the wallet balance to an asset with a deficit balance. The Matching Engine handles the auto exchange process.

In Summary

With the introduction of Multi-Assets Mode, users can now diversify their stablecoin exposure between BUSD and USDT. Additionally, this feature also allows arbitrageurs and sophisticated traders to efficiently manage their margin and P&L, making it an ideal product for long-term traders, arbitrageurs, and hedgers.

Read the following helpful articles for more information about Binance Futures:

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Therefore, you should not trade or invest money you cannot afford to lose. It is crucial that you fully understand the risks involved before deciding to trade with us in light of your financial resources, level of experience, and risk appetite. If required, you should seek advice from an independent financial advisor. The actual returns and losses experienced by you will vary depending on many factors, including, but not limited to, market behavior, market movement, and your trade size. Past performance is not a guide to future performance. The value of your investments may go up or down. Learn more here