Bi currency investments: how it works in the world of cryptocurrencies

In the period of increased turbulence in the markets, when spot trading becomes too risky and traditional deposits do not bring income, investors are considering more sophisticated tools

Bi currency investments: how it works in the world of cryptocurrencies

Bi currency investments refer to structured products that include more than one asset and have a fixed term. Different ways of generating returns on selected assets make it possible to diversify investments and reduce investment risks. A guarantee of return on principal is also a distinctive feature of some types of bi currency investments.

Structured instruments have become widespread in the global currency and stock markets, and now in the cryptocurrency market as well. Exchanges offer various bi currency products with certain conditions: cryptocurrency pairs, method of income formation, term of validity and other points are prescribed in advance. Basically, such a product consists of two currencies, one of which is a risky asset and the other is a stable asset.

The investor’s investments are blocked for a certain period and at a certain percentage, and at the end of the blocking period the platform returns the funds in the currency specified in the contract. Usually the interest rate of such a product is higher than that of a standard deposit offered on the same platform.

How Bi currency Products Work

Let’s take the BTC/USDT pair as an example. Suppose that an investor expects bitcoin to rise up to $30k during the blocking period. He makes a 7-day deposit of 1 BTC with an execution price of $30 thousand at 5% (for the duration of deposit, not yearly).

If the rate rises above the execution price, the owner of the deposit receives the amount in USDT at the execution price of $30k plus 5% ($1.5k). The total is $31.5 thousand.

If the rate is below $30k, the investor receives back his/her 1 BTC, plus 5% in the same cryptocurrency (0.05 BTC). Total 1.05 BTC.

Thus, the income will be received in any case. In most of the variants of bi currency deposits offered, the set profitability is the higher, the longer the term of funds placement.

Conversion terms may vary. It can be carried out, if the currency rate for the time of blocking of funds has exceeded the execution price established by the contract, and has fixed above this level. Under other conditions, conversion may be carried out if the exchange rate exceeded the strike price at least once, but then came back.

Bi currency investments are a trading tool that offers high income and short deposit terms with flexible customization. However, you should not forget that high income always comes with risk.

Advantages of Dual Currency Investments

High percentage of profitability. The potential profit you can get from a bi currency deposit is higher than other passive investments in digital assets;

A large number of cryptocurrency pairs available. Exchanges currently offer a wide range of assets;

No trading commissions: The investor does not have to pay commissions as in the spot market;

Fixing profits. Possibility to sell the cryptocurrency at the target price and get the known income from the investment in advance;

Short deposit period makes such investments safer than others;
Platforms offer products with different risk load: variants differ in currencies, execution price, lock-in terms and profitability.

Disadvantages of bi currency products

Assets are blocked for an agreed period of time, and the investor cannot return the funds until the settlement date. This explains the high yield of the product on the long terms of placement;
In the event of unfavourable market movements, the value of the settlement currency may be lower than the value of the deposited currency;

If the price is far from the target price, you will not be able to buy or sell assets at a favorable price;

Often a trade is executed based only on the price on the settlement date;

The higher the volatility, the more difficult it is to predict the rate at the end of the deposit period and relate it to the strike price.
As with any investment, there are risks associated with using bi currency deposits. You should always carefully review product information and do your own research to predict price movements.

When to use bi currency investments

A rising market.

In a bull market, the probability that the estimated price will exceed the benchmark is quite high. In this scenario, when an investor using the USDT/BTC pair deposits bitcoins, he expects to make a profit when converting the coins to USDT based on the strike price (control price), as well as interest, when he returns the funds.

A falling market

In a bear market, the coin price is in a downtrend. Regardless of whether a trader deposits BTC or USDT, earnings are more likely to accrue in crypto-assets other than Stablecoins. This allows you to get more coins (at the expense of interest) even if the price falls.

Instead of a conditional order.

Bi currency investments are sometimes used instead of a conditional order to make a profit on a coin or set a target price to buy it.

During a downtrend, the estimated price falls below the strike price. In this way, bi currency products allow you to get more coins than if you set a purchase price on the spot market through a conditional order.

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