Cryptocurrency is fast becoming a world of its own whose popularity can never be over emphasized as the day goes by. Crypto assets like Bitcoin, BNB and Ethereum have also become popular around the world that other strong contenders that apply other technologies are making their way into the crypto circle as well. Cryptocurrency is not all about volatility hence the importance of stablecoins.
What Are Stablecoins?
Stablecoins are the leading types of crypto assets used in the crypto exchange sphere in the world today. Stablecoins are cryptocurrencies whose values are pegged to fiat currencies such as U.S. dollar or to exchange traded commodities such as gold.
Stablecoins were developed to avoid the high levels of volatility common in the cryptocurrency market.
There are three main stablecoins widely used in the crypto sphere, they are;
Fiat-backed stablecoins, like BUSD, they are pegged to traditional fiat currencies. They maintain a peg by keeping fiat reserves that can be exchanged for the stablecoin.
Crypto-backed stablecoins (such as DAI) over-collateralize their tokens to factor in crypto price volatility, and,
Algorithmic stablecoins control supply without the need for reserves.
Popular stablecoins include; Tether (USDT), USD Coin (USDC) and Binance USD (BUSD).
Stablecoins are cryptocurrencies with their values pegged to another asset.
What is BUSD？
BUSD is a regulated, fiat-backed stablecoin pegged to the U.S. dollar. For every unit of BUSD, there is one U.S. dollar held in reserve. In other words, the supply of BUSD is pegged to the U.S. dollar at a 1:1 ratio. Holders can swap their tokens for fiat and vice versa. Paxos, the token’s issuer, releases monthly attestations of BUSD’s reserves.
As a stablecoin, BUSD is designed to maintain a stable market value. It allows investors and traders to hold a low-volatility asset on the blockchain without the need to exit the crypto space.
BUSD is a stablecoin founded by Paxos and Binance. Paxos uses blockchain technology to offer their Stablecoin as a Service product to external companies.
BUSD offers three key attributes to transactions: accessibility, flexibility, and speed. The token is easily accessible through Paxos or Binance. You can purchase them through Binance’s exchange or fiat gateway services, or send an amount in U.S. dollars to Paxos to mint new BUSD tokens for you.
BUSD also offers flexibility in allowing crypto users to quickly turn their holdings into a stable asset without moving off the blockchain. Finally, by using BUSD, a user can quickly send money around the globe with nominal fees.
Why You Should Choose BUSD as Your Collateral
· Settlement in BUSD — contracts are denominated and settled in BUSD. A versatile settlement currency across the BUSD-margined futures product line.
· No expiration date — you can hold positions without an expiry date and do not need to keep track of various delivery months, unlike traditional futures contracts.
· Funding rate — every eight hours, funding rates are paid either to the long or the short based on differences with the spot right. Thus, it prevents lasting divergence in the price of the spot and perpetual contract markets.
· Clear pricing rules — each futures contract specifies the base asset’s quantity delivered for a single contract, also known as “Contract Unit”. For instance, BTC/BUSD, ETH/BUSD, and BNB/BUSD futures contracts represent only one unit of its respective base asset, similar to spot markets.
Benefits of Holding BUSD
Compared to other stable coins, BUSD stands at the advantageous side with amazing and unique offers;
· Strict Compliance: BUSD is a regulated stablecoin pegged to the U.S. dollar at a 1:1 ratio. The stablecoin is issued by Paxos and approved by the New York State Department of Financial Services (NYDFS).
· 100% Backed by Cash & Cash Equivalents: BUSD reserve assets are subject to monthly audits by independent third parties to ensure the supply of BUSD tokens is backed by U.S. Dollars. These reserves are held in FDIC-insured bank accounts and US Treasury bills.
· Purchase and Redeem With Zero Fees: For a limited time, take advantage of our Zero Maker Fee promotion for all BUSD pairs and our Zero Transaction Fee promotion for 4 BUSD stablecoin pairs. Users can purchase and trade BUSD with a low fee and enjoy industry-leading liquidity in the Spot and Margin market.
How to start trading BUSD-Margined Futures
- Open an Account — Open a futures account on Binance, kindly note that 2FA verification must be enabled to fund your futures account before you start trading on Binance Futures.
2. Deposit Fund — Deposit BUSD, Binance Futures supports a wide range of crypto assets as collateral.
3. Choose Contract — Select your preferred BUSD-M futures contract. Please select BUSD Perpetual under the USDⓈ-M Futures tab.
4. Select Leverage — Select the appropriate leverage for your BUSD-M futures contract. The default leverage is set to 20x, but users can adjust their leverage.
5. Place order — Place orders according to the various order types available on Binance Futures. For starters, you can select a buy-limit or buy-market order to purchase for your first BUSD-M futures contract.
How to Use the Multi-Assets Mode to Trade BUSD-M Futures
The addition of Multi-Assets mode has made trading on Binance Futures more versatile. This feature has provided more use cases for USD-M Futures contracts, enabling traders to be more active and adaptable in various market conditions.
Multi-Assets Mode is a new trading feature that allows users to trade various crypto futures contracts using USDT or BUSD as collateral.
With the Multi-Assets mode, traders can now share their margin across USDT-margined and BUSD-margined contracts to experience a more diverse flavor of trading.
Profits made on any contract (BUSD or USDT) can also be used as margin on another contract in Multi-Asset mode.
BUSD-Margined Futures are a type of linear futures product that is quoted, collateralized, and settled in BUSD. As a result, not only are transactions fairly easy to calculate into USD (or other fiat currencies), but they are also much less prone to volatility. Because these trades are stablecoin-settled, they act as a shield against volatility in most cases, especially when involving other cryptocurrencies like BTC, ETH, or BNB.
Traders can also expect to enjoy lower fees and maker rebates when using BUSD-margined contracts. Fee discounts apply to any trading pairs such as BTC/BUSD, ETH/BUSD, BNB/BUSD, or any other sort of BUSD perpetual contracts.
Transacting with BUSD on Binance Futures has also proven to be a cost-effective choice. Binance Futures has launched the Zero Maker-Fee promotion for all BUSD pairs and the Zero transaction fee promotion for 4 BUSD stablecoin pairs, users can purchase and trade BUSD with a low fee and enjoy the great liquidly in the Spot and Margin market.
Trading BUSD-M contracts offers more cost-saving benefits under Multi-Asset Mode.
As a BUSD holder, not only can you save on trading fees in the Spot and Margin markets, but you can also save on fees trading the BUSD-M contracts. Also, with Multi-Asset Mode, you can trade USDT-M contracts without having to convert them to USDT, offering you accessibility to open positions in both USDT-M and BUSD-M contracts whenever the opportunities arise.
A USDT holder can save on fees by trading BUSD-M contracts as they offer lower fees and maker rebates. This way, you could reduce your transaction costs and enjoy more profits.
Also, in Multi-Assets Mode, traders can trade in two different directions on the same underlying crypto because they can trade in BUSD or USDT.
For instance, if a trader believed that BTC/BUSD would take a loss due to an upcoming price drop in BTC, they could short a BTC/USDT contract to counteract the potential loss.
So, let’s say you held a long-term position valued at 60,000 BUSD in BTC/BUSD perpetual contracts. Considering the results of some technical analysis, you predict that there is an upcoming downtrend in the near term. By using Multi-Assets mode, hedging for this scenario is simple. The way to bet against BTC and short it would be with a USDT quarterly contract. Your position could simply be to trade half the size of your BUSD position into USDT. In other words, 30,000 USDT worth of BTC/USDT quarterly futures contracts.
Should the price of BTC fall 20%, the losses incurred in BTC/BUSD perpetual would still amount to -12,000 BUSD. Your hedge, however, trading at half the value of your long-term position, would serve to cushion the loss by 6,000 USDT. Thus, although there is still a loss, the risk was mitigated, and in the end, cut down by 50% because BUSD and USDT are linear products, both pegged equally to the US dollar.
Since BUSD-Margined Futures are somewhat of a more risk-averse trading method, they can be a prudent choice, especially in highly volatile market conditions. But when coupled with the Multi-Assets mode, the features and advantages improve even further.
Using Mock Trading to Sharpen Trading Skills
One fantastic way to build confidence in your trading strategy is with mock trading. At Binance Futures, we offer a testnet environment to help traders sharpen their trading skills with zero risk.
You can trade at your own pace and test multiple strategies without risking any capital. And when you feel like you are ready, you can easily switch to real trading and enjoy the same tools from the leading crypto derivatives exchange.
It is crucial that you fully understand the risks involved before deciding to trade with us in light of your financial resources, level of experience, and risk appetite.
If you have not started using stablecoins during investments or trading cryptocurrency, it is expedient to learn about them, their benefits and the likely drawbacks that they pose.
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