Introduction to Dual-Currency Cryptocurrency Investments
Many cryptocurrency trading platforms offer financial products called "dual-currency investments." These products claim that whether Bitcoin rises or falls, users can always earn profits in BTC or USDT.
For example, let's examine Binance's dual-currency investment page. Suppose BTC's spot price is 47,205, with a settlement date of September 24, 2021. If you invest 1 BTC, here's what happens at settlement:
- If BTC spot price ≥ 48,000: You receive 48,172.8 USDT (profit, since your BTC cost basis was 47,205).
- If BTC spot price < 48,000: You receive 1.0036 BTC (profit, as you now hold more BTC than initially invested).
At first glance, this seems too good to be true. How does this strategy work? Are there hidden risks? Let’s explore the mechanics behind it.
Understanding Options (Derivatives)
What Are Options?
Options—referred to as option in English—are financial instruments granting the right, but not the obligation, to buy (call) or sell (put) an asset at a predetermined price (strike price) by a set date (expiration).
Example:
- Current BTC price: $40,000
Buyer (Call Option): Pays $100 to secure the right to buy 1 BTC at $45,000 in 3 days.
- If BTC hits $50,000, they profit by buying at $45,000 and selling at $50,000 (minus the $100 premium).
- If BTC drops to $30,000, they let the option expire, losing only the $100 premium.
Here, the seller (Writer) earns the $100 premium but faces unlimited downside risk if prices surge.
Call Options vs. Put Options
Call Option:
- Buyer: Bets on price increases.
- Seller: Obligated to sell the asset at the strike price if exercised.
Put Option:
- Buyer: Bets on price decreases.
- Seller: Obligated to buy the asset at the strike price if exercised.
The Seller’s Perspective: Risk Management
Covered Call Strategy
- Action: Sell a call option while holding the underlying asset (e.g., 1 BTC).
Outcome:
- If BTC ↑ above strike: Sell BTC at the strike price + keep premium.
- If BTC ↓: Keep BTC + premium.
Cash-Secured Put Strategy
- Action: Sell a put option with enough cash to buy the asset if exercised.
Outcome:
- If BTC ↓ below strike: Buy BTC at strike price + keep premium.
- If BTC ↑: Keep cash + premium.
Dual-Currency Investments Decoded
Core Mechanics
- You act as the option seller, earning premiums.
BTC Investment: Selling a call = setting a limit sell order + collecting interest.
- Risk: BTC may surge, "selling away" your holdings prematurely.
USDT Investment: Selling a put = setting a limit buy order + collecting interest.
- Risk: BTC may plummet, locking you into unfavorable buys.
Risks at a Glance
| Strategy | Primary Risk | Outcome Scenario |
|---|---|---|
| BTC (Call) | Asset sold below potential highs | BTC rallies past strike price |
| USDT (Put) | Overpaying in a crash | BTC drops below strike price |
FAQ
1. Is dual-currency investment risk-free?
No. While premiums offer consistent income, market volatility can lead to undesired asset liquidation or acquisition.
2. Who should use this strategy?
Traders comfortable with holding assets long-term or those aiming to accumulate/sell at specific price levels.
3. How are premiums calculated?
Factors include time to expiration, volatility, and strike proximity to spot price.
4. Can I lose more than my initial investment?
Only if selling naked (unsecured) options—always use covered/cash-secured strategies.
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Key Takeaways
- Dual-currency products are advanced tools combining options and spot trading.
- Sellers profit from premiums but must manage price-risk exposure.
- Use covered strategies to cap potential losses.
Always DYOR (Do Your Own Research) before committing funds.