This is the second article of Binance Dual Currency Investment Product. There are three articles in this series. We are also testing the newly launched Q&A red envelope grabbing function. It seems that the exposure is not enough. Only 41 out of 100 red envelopes have been sent out. We will keep the original amount this time and adjust the number of red envelopes to 50 to see the effect. The first article can be seen at the top of my article column, which introduces some basic concepts (by the way, there are nearly 60 red envelopes that no one has received).
In this article, I mainly want to analyze this product from the perspective of "Why dual-currency investment is beneficial to users". Due to my limited financial level, I also consulted the Binance dual-currency investment team on some issues, and wrote this article based on superficial research. I hope that everyone can discuss and understand this issue while answering questions and grabbing red envelopes in the comment area.
The underlying support of dual-currency financial management
The dual currency financial strategy product is derived from options. Options are a type of financial derivative that provides a right (but not an obligation) to buy (called a call option) or sell (called a put option) a specific asset at a specific price at a specific time in the future. This asset is called the "underlying asset" and can be stocks, bonds, commodities, currencies, indices, etc.
The buyer of an option (also called the holder of an option) pays a fee for this right, which is called the "option premium" or "option price". The person who sells the option (also called the issuer or seller of the option) is obligated to buy or sell the underlying asset when the option is exercised.
Generally speaking, the characteristics of options mainly include:
Rights but not obligations: The holder of an option has the right to decide whether to exercise the option, but has no obligation. For example, if a person owns a call option on a stock, when the price of the stock is higher than the exercise price of the option, he can choose to exercise the option to buy the stock, and then sell it at a high price in the market, thereby making a profit. But if the price of the stock is lower than the exercise price, he can choose not to exercise the option, and the maximum loss is the premium he paid for the option.
Risks and Rewards: Both the risks and rewards of option trading can be very large. For the buyer of an option, the risk is mainly that the entire option premium may be lost; but the reward is theoretically unlimited. For the seller of an option, the risk is theoretically unlimited, but the reward is limited to the option premium received.
Leverage effect: Because the price of an option is only a small part of the price of the underlying asset, through option trading, investors can control a larger underlying asset with a smaller investment, which is the so-called "leverage effect". This means that a small change in the price of the underlying asset may lead to a large change in the option price, resulting in investors obtaining high returns or suffering huge losses.
The above options market (leverage, interest rate, exercise date, etc.) is the underlying logic of the dual-currency wealth management product. The dual-currency wealth management product is built on this options trading market, so you can understand why there is a relatively high annualized interest rate.
What is the point of dual currency financial management?
Let's refine the example from the previous article a bit:
You have digital currency (BTC, ETH, etc.) and can choose a time to sell it at a price for USDT. For example, if you choose to sell BTC at price A after 20 days, your digital currency BTC is locked. Note that it is locked and you can only wait for 20 days. What will happen after 20 days:
If the price is greater than or equal to A, you will sell the digital currency BTC at price A and get USDT.
If the price is less than A, your digital currency is not sold and will be returned to you.
You will receive high interest for 20 days. In the first case, the interest is settled in USDT, and in the second case, the interest is settled in digital currency. Please note that this high interest is something that the options market has created!
Of course, if you have stablecoins, you can also choose to buy low. The whole process is similar to the above process.
I found that a more successful way to play is to not settle the investment after it expires, and then I just take the high interest. This is like you accurately judge the resistance and pressure levels.
Risks of Dual Currency Investment
The risks are actually very easy to understand:
There is a lock-up period after buying. For example, if you lock it for 5 days, and the market fluctuates violently within 5 days, you can only watch helplessly.
For example, if you set the high selling price of BTC to 32,000 after 5 days, and the price is 50,000 after 5 days, the system will sell it to you at the agreed settlement price of 32,000. You will suffer a huge loss.
For example, if you set the low buy price of BTC to 28,000 after 5 days, and the price after 5 days is 8,000, the system will still buy it for you at 28,000. You will suffer a huge loss.
Advantages of Dual Currency Investment
The advantages are actually quite obvious:
There is no transaction fee. If you are doing day-line trading, it is actually more suitable because the transaction fee is 0 and you can also earn interest.
The dual-currency investment amount is included in the VIP level assessment and BNB holding assessment, so you can enjoy various benefits of the Binance platform.
For holders of digital currencies that they like and recognize, and believe that they will rise sharply in the future, they have great advantages, because the third risk mentioned above is not a concern for them, because if the price of the currency is not at the psychological price, they will always hold the currency and still get high interest. As our CZ said, if you can't HOLD, you won't be RICH.
User Terms:
Well, when you use it, you have to check the user agreement. You usually don’t read it, right? Here is a summary of some of the main terms and conditions of the two-way investment involved in this user agreement:
Product Description: Bidirectional investment is a financial derivative that allows users to earn fixed income within a certain period of time while retaining the possibility of obtaining higher returns when prices rise or fall.
Trading currency: Users can choose to trade in USDT or other cryptocurrencies.
Expiration Date: The expiration date of the product is determined when the user purchases the product. After the expiration date, the product will be settled.
Settlement currency: The settlement currency is selected by the user when purchasing the product, which can be USDT or other cryptocurrencies.
Profit: The user's profit will change according to the change of market price. If the market price is higher than or equal to the trigger price, the user will receive the principal and profit in the settlement currency. If the market price is lower than the trigger price, the user will receive the principal and profit in the transaction currency.
Risk Warning: Two-way investment products involve market risks. Users need to fully understand how the products work and invest according to their own risk tolerance.
Well, at this point, I have finished talking about the points I wanted to express in this article. I plan to learn the following practical operations of dual-currency investment and discuss them with you in the next article.
