For many crypto investors, this may be the first time they have heard of dual currency investment or they may be a little confused about the concept. Recently, Binance Square held an AMA on dual currency investment to explain the mechanism behind it and some suggestions for novices.
The guests of this AMA are: Data Pie Trader, Binance Square Creator Chain Research Society, Crypto Options Player, Weibo Finance KOL Long Xinyan, and Binance Finance Vivian. The following is the highlights of the AMA:
What is Dual Currency Investment?
Dragon Heart Salt:
Dual Currency Investment is a passive financial management tool, and its operating principle is similar to the deposit mechanism in real estate transactions. For example, if you want to buy a second-hand house, you need to pay a deposit first to lock in the price to prevent default at the time of delivery. In Dual Currency Investment:
You as the seller receive a premium (similar to a deposit)
A promise to buy/sell cryptocurrency at an agreed price in the future
The exchange acts as an intermediary to ensure that the contract is enforced.
Chain Research Society:
This is actually a simplified version of the options strategy in the traditional financial market:
Bottom fishing = Sell put options (use USDT to take over)
Top Sell = Sell Call Option (lock in selling price)
The exchange packages complex options contracts into products that even novices can operate
Vivian:
Binance Financial Management users are familiar with it. We provide a variety of investment options, from principal-guaranteed products (such as current and fixed-term financial management, similar to bank deposits) to high-risk and high-yield products (such as dual-currency investment). For users who want to optimize capital efficiency, dual-currency investment is a tool worth paying attention to.
It can be simply understood as: Dual Currency Investment = Limit Order + Interest
Traditional limit order: placing an order in the spot market (e.g. BTC is currently priced at 93,000, and you place a sell order at 100,000), and you need to wait for the market to trigger, leaving your funds idle and earning no income.
Dual-currency investment: Set the target price as well (e.g. sell BTC at 100,000), but earn additional premium interest (approximately 20% -100% + annualized). You can earn profit regardless of whether the transaction is completed or not.
Features of Binance Dual Currency Investment
High returns
The basic annualized rate starts at 3.65%, and some short-term products can reach 20%-200%.
Actual return formula: annualized return × (number of holding days/365). The longer the holding period, the greater the return.
Flexible term
Short term (within 7 days): suitable for capturing market fluctuations, with a price difference of about 15% (e.g., if the current price of BTC is 93,000, you can sell it at 105,000).
Long term (6 months): Suitable for a robust strategy, and a higher target price can be set (e.g. sell BTC at 130,000).
Easy to operate
Supports mainstream currencies (BTC, ETH, etc.), with a minimum investment of 0.1 U.
No complicated operations are required, the transaction will be automatically executed after setting the price and deadline.
Of course, dual-currency investment is not completely capital-protected, and you may miss opportunities due to the huge increase in currency prices. Teacher Long Xinyan gave us an example: In December 2023, there was a typical case. In pursuit of 300% annualized return, a user placed an order for 100,000 BTC at 95,000 (only 5% price difference). As a result, the price soared to 110,000 within a week. Although he earned the premium, he missed the increase of 15,000 per coin.
Dual Currency Investment Suitable Users and Beginners
Coin hoarders: Earn interest while holding coins to avoid idle funds.
Swing traders: Earn extra premium income compared to ordinary limit orders.
Conservative investors: choose long term + wide spread (such as above 15%) to reduce exercise risk.
For users who are new to dual-currency investment, it is necessary to do a good job of risk management. The guests also gave some tips:
Small amount test: Try with 0.1 BTC or 100 U
Select safety margin: spread > 15% (e.g. BTC pending order of 107,000 to sell)
Term selection: 14-30 days products are preferred
Hedging preparation: Reserve 20% of funds to deal with extreme market conditions
In addition, the guests also gave the following answers to some common questions from users. How to judge whether the current market is suitable for dual-currency trading? Teacher Long Xinyan mentioned that there are two main indicators: one is the volatility index > 80 (the premium is high during panic), and the other is the sideways cycle: BTC fluctuates in the 5% range for more than 2 weeks. Some users want to remedy the situation after being exercised. The teacher of Lianyanshe gave a solution. If you sell BTC dual-currency at 100,000, but the price rises to 120,000 and the option is exercised: immediately use 10% of the position to open a long perpetual contract, wait for the callback to 110,000 to close the position, and use the profit part to re-hang the sell order at 110,000.
For altcoins, one should be more cautious when investing. A better strategy is to only sell high and not buy at the bottom (high liquidity risk). You can set a price difference of > 30% (for example, if the current price is $100, set a sell price of $130).
To Investors
Finally, I would like to remind all users that dual-currency investment is not a completely principal-protected investment. You need to think carefully before making any investment decision. Dual-currency is a game of trading time for space and is suitable for patient investors. Always keep 30% of cash on the investment road to deal with black swans.
