Binance's Dual Investment: Risks And Rewards

Binance Dual Investment is a financial product offered by Binance that allows users to deposit a cryptocurrency and earn a return based on two assets. While it offers a high return, it also carries significant risks. The crypto market is highly volatile, and the final payout will depend on the price of the asset upon delivery and the strike price. One of the main risks is that the invested asset can be converted into another cryptocurrency upon delivery, and subscriptions cannot be canceled, leading to a potential loss during a period of high market volatility. Additionally, there is a chance that the cryptocurrency can be delisted or suspended from trading before the settlement date. Furthermore, if the market price does not reach the target price, investors may miss out on profitable trading opportunities. Understanding the complexities and risks of Binance Dual Investment is crucial before considering this investment strategy.

Opportunity cost is the biggest risk

Opportunity cost is the most significant risk factor in Binance's dual investment strategy. This is because the crypto market is extremely volatile, and the annualised return, while fixed, is influenced by the price of the asset at the time of delivery and the strike price.

Dual investment in Binance involves a high-yield financial product where you can deposit a cryptocurrency, such as USDT, and earn a return based on two assets, for example, USDT or BTC. The dual aspect comes from the two possible scenarios that can play out:

• If the price of BTC is above the strike price at the delivery date, you will receive your USDT deposit plus interest in USDT.
• If the price of BTC is below the strike price at the delivery date, you will receive your USDT deposit converted to BTC at the strike price, plus interest.

The risk lies in the fact that if the price of BTC increases significantly above the strike price, you would be better off simply holding your USDT deposit instead of investing it in the dual investment strategy. In this case, the opportunity cost of forgoing higher potential returns by investing in dual investment instead of holding your USDT is the biggest risk.

For example, let's say you deposited 1,000 USDT with a strike price of $43,000 for BTC. If, at the delivery date, the price of BTC is $50,000, which is significantly above the strike price, you will receive your initial 1,000 USDT deposit plus interest. However, if you had simply held onto your USDT, you could have exchanged it for BTC at the new, higher price of $50,000, resulting in a higher overall return. In this case, the opportunity cost of missing out on potential gains by investing in dual investment instead of holding your assets is the main risk.

It's important to note that dual investment also carries other risks, such as the inability to cancel or redeem your subscription before the settlement date and the possibility of the cryptocurrency being converted to another currency. However, opportunity cost due to the volatile nature of the crypto market poses the biggest risk to investors.

Funds are locked, so there is a risk during a period of high volatility

Binance Dual Investment is a financial product offered by Binance that allows you to deposit a cryptocurrency and earn a return based on two assets. The crypto market is highly volatile, and this is where the risk of Dual Investment lies.

Subscriptions to Dual Investment cannot be cancelled. Funds are locked in for the duration of the subscription period, which can be as short as 7-15 days or as long as 30-60 days. This creates a risk during a period of high volatility in the crypto market. If the market becomes volatile, investors cannot withdraw their assets and are locked into their subscriptions until the end of the duration.

For example, if you are depositing a stablecoin in a Down-and-Exercised subscription, you will take a loss if the Bitcoin price is significantly below the strike price at the delivery date. If the crypto market becomes volatile and the price of Bitcoin drops, you will be unable to cancel your subscription and will be locked into selling at a lower price.

The risk of funds being locked in is further exacerbated by the fact that the reference price mentioned in the product details may be readjusted according to the price on the Spot market, up to 24 hours after the start of the offer period. This means that if the crypto market becomes volatile, the reference price could be adjusted to a less favourable rate, and investors will be unable to cancel their subscriptions.

In addition, the crypto in which you hold a trading position may be delisted from the trading platform or suspended from trading before the settlement date, creating further risk.

The reference price can be readjusted according to the spot market price

When considering dual investment on Binance, it's important to understand the associated risks. Dual Investment is a high-yield financial product offered by Binance that allows you to deposit a cryptocurrency, such as USDT, and earn a return based on two assets, for example, USDT and BTC. While it offers a high annualized return, the final payout is influenced by the price of the asset upon delivery and the strike price. This creates a risk factor due to the volatile nature of the crypto market.

Now, let's focus on the reference price and its potential readjustment:

The reference price is a crucial aspect of Dual Investment. It refers to the current price of the underlying asset, such as Bitcoin (BTC) or Ethereum (ETH). This reference price is used to determine the potential payout you will receive at the end of the investment period. The reference price mentioned in the product details when you subscribe to a Dual Investment offering may be readjusted according to the price on the Spot market. This readjustment can occur up to 24 hours after the start of the offer period.

The ability to readjust the reference price according to the Spot market price adds a level of flexibility to the Dual Investment product. It ensures that the reference price remains relevant and up-to-date, reflecting the current market conditions. This is particularly important in the volatile crypto market, where prices can fluctuate significantly within a short period. By allowing for this readjustment, Binance provides a mechanism to mitigate the risk of using outdated reference prices, which could lead to unexpected outcomes at the end of the investment period.

It's important to note that while the reference price can be readjusted, there are still risks associated with Dual Investment. As mentioned earlier, the crypto market is highly volatile, and prices can change rapidly. Additionally, subscriptions cannot be canceled, and funds are locked in during the investment period. This means that if the market moves in an unforeseen direction, you may miss out on better opportunities or face losses if the price moves significantly away from the strike price.

In conclusion, while the reference price can be readjusted according to the Spot market price, it's crucial to approach Dual Investment with a thorough understanding of the risks involved. Conduct your own research, carefully review the product terms, and consider seeking independent financial advice before making any investment decisions.

The crypto in which you hold a position may be delisted before the settlement date

When a cryptocurrency is delisted from an exchange, it means that the token can no longer be traded publicly on that exchange. This can happen for a number of reasons, including low trading volume, regulatory factors, and market manipulation. If the crypto in which you hold a position is delisted before the settlement date, you may face difficulties in accessing your assets. Here are some potential consequences and considerations:

• Withdrawal and Trading Limitations: When a token is delisted, the exchange will typically provide a specified period during which you can withdraw or swap your tokens. After this period, the asset may no longer be supported, and you might lose access to it. It is crucial to act promptly during the grace period provided by the exchange.
• Impact on Liquidity and Price: Delisting can affect the liquidity of the cryptocurrency. Reduced liquidity may lead to challenges in buying or selling the asset. Additionally, the price of the delisted crypto may be subject to substantial fluctuations. It could experience a significant drop or, conversely, gain increased attention and experience a price surge.
• Alternative Trading Options: Even if a token is delisted from one exchange, it may still be traded on other centralised or decentralised exchanges that support it. Exploring alternative trading platforms can help you continue accessing the crypto market for that particular asset.
• Peer-to-Peer Transactions: Cryptocurrency transactions are not solely dependent on exchanges. You can still engage in peer-to-peer transactions with other individuals who are willing to buy or sell the delisted crypto. However, this method may involve higher risks and less comfort compared to trading on exchanges.
• Wallet Considerations: Holding your crypto assets in a self-custody wallet, rather than on an exchange, ensures that you maintain control over your funds. In the event of a delisting, you can transfer your tokens to a secure wallet, protecting your investment until you decide on your next course of action.
• Relisting Possibilities: There is a chance that another exchange may relist the delisted crypto, providing a new avenue for trading. However, this is not guaranteed, and you may need to wait for such an opportunity.
• Stablecoin Conversion: In some cases, the exchange may automatically convert your delisted tokens into a stablecoin, directly crediting your wallet balance with the equivalent value. This provides stability, but you will no longer hold the original crypto.
• Asset Forfeiture: In more severe scenarios, the exchange might confiscate the delisted tokens, and users will have no legal recourse to reclaim the funds. This outcome underscores the importance of staying informed about potential delistings and taking proactive measures to secure your assets.

The dual investment is only good during the accumulation period

Dual investment is a non-principal-protected structured saving product that provides a healthy yield with two cryptocurrencies. It is ideal during the accumulation period as it allows investors to monetise their market view and reap high returns, regardless of market pulse.

Dual investment is especially useful when the target price is not achieved. In this case, you can keep your cryptocurrency while earning a high-interest yield. It is also useful when the target price is achieved, but the market price is not much higher than the target price. The extra interest income acts as a cushion, allowing you to sell the cryptocurrency against holding.

However, dual investment is not always the best strategy. If the target price is achieved, but the market price is much higher than the target price, simply holding your cryptocurrencies would be a better strategy. In this case, selling your crypto at a price much lower than the current market price would not be offset by the extra interest income.

Additionally, dual investment comes with certain risks. One risk is that the price of the crypto can go down, leading to a loss of value if the invested amount is in crypto. This risk does not arise when investing stable coins. Another risk is that subscriptions cannot be cancelled. There is a risk due to the blocking of funds during a possible period of high volatility in the crypto market.

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