We've all heard the old buy low and sell high, the truth is that it is easier said than done! Thankfully, there are some tools that can help you! One of them is Binance Dual Investment! Are you wondering what Binance Dual Investment is? Have you heard about it but don't know where to start? We're here to help! Let's take a deep dive into it and help you get started!
Disclaimer: We want to emphasize that this is not financial advice. Cryptocurrencies operate in a volatile market, where values can drastically fluctuate in a blink of an eye. It is imperative to conduct thorough research and seek guidance from a qualified financial advisor before investing.
What Is Binance Dual Investment?
Binance Dual Investment uses the same metric for giving returns as liquidity pools and staking, but the difference is the returns are super high.
It’s normal to find an annual percentage yield (APY) of 50%. If we’re talking about the upper side, some subscriptions even offer APY over 300%. For this reason, dual investment has a high demand.
It’s important that you become familiar with the risks and working methods before making any investment. Let’s start with key terminologies.
Binance Dual Investment: Key Terminologies
Before proceeding further, it’s important that you become familiar with the key terminologies.
Strike Price: A set price at which deposit currency gets converted into alternate currency if the settlement price goes above/below this price, depending on the product.
Settlement Price: Average of the spot price in the last 30 minutes before 8:00 (UTC).
Spot Price: The current price of the currency you deposit.
Underlying Asset: An asset on which the dual investment is based. For example, if you’re referring to ETH spot price and ETH strike price, the underlying asset is ETH.
Delivery Date: The date when your locked assets will be released.
Deposit Days: The number of days remaining until the delivery date.
Deposit Currency: The currency that you deposit into the dual investment.
Alternate Currency: The currency that you get instead of the currency you deposited if the product is exercised.
Types of Dual Investments
Binance offers two types of Dual Investment. Up-and-Exercised (Sell High) and Down-and-Exercised (Buy Low). Both products use the same metrics, but different rules.
Let’s take a look at both of them!
Up-and-Exercised (Sell High)
These products allow the user to set a strike price that’s higher than the spot price. If the settlement price is greater than or equal to the strike price at the delivery date, the product will be exercised.
Here is an example to show you how it works:
You have invested 1 BTC in the Up-and-Exercised product. Let’s say the value of 1 BTC is $10,000, and you’ll get an APY of 40% within the next 30 days. The strike price was set at $15,000.
At the delivery date, there will be two potential outcomes:
Outcome 1: The settlement price reaches $15,000. The product will be exercised and you’ll get 1 BTC at the current rate back in BUSD + 40% APY.
The amount received = 15,493 BUSD
Outcome 2: The settlement price is below $15,000. The product won’t be exercised and you’ll get 1 BTC at the deposit rate + 40% APY.
The amount received = 1.0328767123 BTC
Down-and-Exercised (Buy Low)
These products work in the opposite manner to Up-and-Exercised. Users can set a strike price lower than the spot price, and if the supplement price is lower than the strike price, the product will be exercised.
Here is an example that explains how Down-and-Exercised works.
You have invested 100 BUSD in the Up-and-Exercised product. The value of 100 BUSD is $100, and you’ll get an APY of 40% within the next 30 days. The underlying asset is BTC with the current value of $30,000 and the strike price was set at $20,000.
Here are the two potential outcomes at the delivery date:
Outcome 1: The settlement price reaches $20,000. The product will be exercised and you’ll get BUSD in BTC + 40% APY.
The amount received = 0.0052 BTC.
Outcome 2: The settlement price is above $20,000. The product won’t be exercised and you’ll get BUSD + 40% APY.
The amount received = 104 BUSD.
Binance Dual Investment: Getting Started
Getting Started on Desktop
Step 1: Log in to your Binance account. Once you’re logged in, click on the Finance button at the top menu and then on Binance Earn > High Yield.
Step 2: A new page will open. Scroll down and you’ll find a heading saying Dual Investment. There will be a paragraph below it and below the paragraph, there will be a View More button. Click it.
Step 3: Now, you’ll be shown different products with different underlying assets. Such as BTC, ETH, and USDT. Select the asset you want.
Step 4: Only the products with the chosen assets will appear on your page. Each product has a different strike price, deposit date, APY, etc. Choose the one you prefer.
Getting Started on Mobile
Step 1: Download the Binance App from the play store.
Step 2: Open the app and on the Homepage, you’ll find the Dual Investment option. Tap it.
Step 3: You’ll be shown a few options. Tap More.
Step 4: A huge list of products will be shown on your screen. Choose the underlying asset you want, so you’ll only see the products you’re interested in subscribing to.
Step 5: Read the important information, such as strike price and APY%, of each product and then subscribe to the one you prefer.
Binance Dual Investment: Risks
Of course, with great reward comes great risk. So, let’s talk about the two risks associated with using Binance Dual Investment.
Lock-up: This is a major risk. The assets are locked-up during the subscription’s timeline. Why is this so bad? Because cryptocurrencies are super volatile. You never know when the price goes up and when it goes down.
If the price goes incredibly high for a short period and you can’t sell your tokens because they’re locked up, you’ll miss an opportunity to make massive returns.
Also, if the price of the token starts decreasing and you can’t sell your tokens at the right time because they’re locked, you’re going to experience a tremendous loss.
Withdrawal At Initial Price: If the product is not exercised, you’ll lose a portion of your investments. Let’s say when you subscribed, the Bitcoin was worth $10,000. When the subscription ends, it’s worth $15,000. Because the product isn’t exercised, you’ll get the Bitcoin at the initial price + APY%.
Meaning you don’t get the profit of $5,000. In Down-and-Exercised, you’ll lose money if the product is exercised.
Conversion Fee: If the product is exercised, you’ll receive your amount in another currency. If you want to convert this currency into some other currency, you’ll be charged a fee.
Dual Investment vs Stop Limit Order
Dual Investment: Although we’ve already covered it, let’s do an overview for the sake of comparison.
The user subscribes to a product that has a set APY%, strike price, and delivery date. If the settlement price does not reach the strike price, the product is not exercised. In this case, the user gets their amount in the same currency they use when they deposited the funds + APY%.
In case the product is exercised, the users receive the amount in alternate currency + APY%.
This rule is for Up-and-Exercised products. For Down-and-Exercised products, the rules are the opposite. The amount received is in alternate currency when the product isn’t exercised, and in the deposited currency when the product is exercised.
Stop-Limit Order: When a user places a Stop-Limit Order, they have to set two prices. The stop price and the limit price. The stop price activates the limit price, and the coins are sold/bought when the market price reaches the limit price. Here is an example to illustrate how Stop-Limit Order works.
The user has BTC worth $10,000. The user wants to make profits by buying BTC as soon as the price starts increasing and then selling it when the price has gone much higher.
Therefore, they decided to set a strike price of $10,100 and the limit price of $10,400.
They can set both prices at the same value. But, it’s better if they don’t. Because the stop price may take a bit of time to activate the limit price, and it happens the market price may exceed the limit price. The execution can only happen at the limit price.
Therefore, it’s better to set the strike price a bit higher than the limit price. Because then the user will have a better chance of executing the order.
The Stop-Limit Order can also be used for saving losses. In this case, the user should set the strike price below the limit price.
- The order may never be executed. In this case, you won’t make any profit or save loss
- You can cancel the order, so it doesn’t have to be a win-or-lose situation
- The profits are fixed
- Profits are not fixed
- The product will expire at the delivery time
- Once you’ve subscribed to a product, you can’t cancel
Binance Dual Investment is an awesome option for those looking to hold on to their crypto while earning passive income! Taking into consideration how volatile the crypto market is, this becomes a great option for profiting from that volatility, it also comes with some risks, as we've previously mentioned, so, before getting started, make sure to consider both risks and rewards! After having done so, if you'd like to get started, simply follow the link below!