Transacting with BUSD on Binance has also proven to be a cost-effective choice. For example, if you make a maker-trade on BTC/BUSD in the spot market, you will not incur fees. Additionally, if you trade a BUSD stablecoin pair such as BUSD/USDT, you can transact with no cost at all.
You may be surprised to learn that there are several options available in the world of crypto futures. Moreover, these options can differ quite significantly from one another. For instance, you can choose to trade futures contracts that hinge on and settle on cryptocurrencies such as Bitcoin (BTC) or Ethereum (ETH). Or you can choose to operate a futures trade using stablecoins (cryptos directly pegged to the US dollar).
Some common stablecoins include Tether (USDT), USD Coin (USDC), and Binance USD (BUSD). The fundamentals of these crypto classes allow them to differ and are why they are important.
What are BUSD-Margined Futures Contracts?
One of the newest futures contracts available on Binance is BUSD-margined futures. BUSD is a USD-backed stablecoin, pegging each BUSD to 1 USD. As a result, BUSD offers faster ways to fund your trades and is acceptable as a medium of exchange, store of value, and payment method across the global crypto ecosystem. It is the 10th largest cryptocurrency in the market and is third in the stablecoin ecosystem.
But how exactly do BUSD-margined contracts work?
BUSD-margined contracts are a type of linear futures product quoted, collateralized, and settled in BUSD, making the entire transaction fairly easy to calculate into USD (or other fiat currencies). This makes BUSD-margined contracts just as intuitive and easy to use as USDT-margined contracts. Therefore, users need not spend additional efforts learning how to use BUSD-margined contracts.
Currently, BUSD-margined futures are available in perpetual contracts.
BUSD-margined Perpetual Contracts | |
Collateral | BUSD |
Margin Mode | Isolated/Cross |
Settlement | Perpetual |
Funding Fee | Yes |
BUSD-margined perpetual contracts offer the following characteristics:
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.
Advantages of Holding BUSD
BUSD offers unique advantages compared to other stablecoins in the market:
1. Strict Compliance and 100% Backed by Cash & Cash Equivalents
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. The stablecoin is issued by Paxos and regulated by the New York State Department of Financial Services (NYDFS). The value of each stablecoin token is tied directly to the value of the US dollar, and the amount of “reserve” dollars equal or exceed the number of stablecoins outstanding. These reserves are only held in the safest forms, such as FDIC-insured bank accounts and in short-term maturity US Treasury instruments.
Regulation and oversight by the New York State Department of Financial Services (NYDFS) is crucial as it ensures that the stablecoins’ value is maintained with their corresponding fiat currency. This means BUSD reserve assets will be audited to match the supply of BUSD tokens and underlying U.S. dollars every month.
Also, it assures stablecoin users that the dollars underlying their stablecoins are secure and will be immediately available when they want them. In the case of BUSD, the New York State Department of Financial Services is responsible for regulating the coin so that individual tokens are always following its determined rules.
2. Purchase and redeem with Zero Fees
Transacting with BUSD on Binance has also proven to be a cost-effective choice. Binance has launched the Zero Maker Fee promotion incentive 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. For example, if you make a maker-trade on BTC/BUSD in the spot market, you will not incur fees. Additionally, if you trade a BUSD stablecoin pair such as BUSD/USDT, you can transact with no cost at all.
These initiatives will help lower your total trading expenses and will help you enjoy more profits. Furthermore, the strict compliance standards and fully cash-backed reserves make BUSD one of the most secure and safest stablecoins for holding.
Why Should You Trade BUSD-Margined Futures Contracts?
BUSD-margined futures provides crypto-futures traders with new perspectives and strategies on how to trade.
1. Enjoy Fee Discounts and Maker Rebates
Traders using BUSD-margined contracts will enjoy lower fees and maker rebates. The fee discount applies to any trading pairs that include BUSD, such as ETH/BUSD perpetual contracts or BTC/BUSD perpetual contracts, just to name a few. The discount period will be valid till September 7th, 2021. During the discount period, the fee structure for all VIP levels are as follows:
Maker: -0.0100%
Taker: 0.0170%
2. Versatility
BUSD is a universal settlement currency that allows traders to trade multiple contracts (BTC, ETH, BNB, etc) at any given time. This means that any contract can be opened in the crypto of a trader’s choosing and settled in a stablecoin on the backend, eliminating the need for traders to buy the underlying cryptocurrencies to fund any futures positions. As such, this minimizes fees that a trader will incur since no exchange conversions will take place when settling in the stablecoin.
Additionally, with the Multi-Assets Mode, users can diversify across various stable coins and increase their capital efficiency. With this feature, users can share their margin across USD-margined products available on Binance Futures (USDT & BUSD); this is particularly useful when opening positions in the two markets.
3. Ease of Calculating Returns in USD
As mentioned earlier, stablecoin prices are pegged to the price of a fiat currency. In the case of the top three most widely adopted stablecoins, they are pegged to the US dollar, meaning 1 BUSD should always be equal to $1 USD. Thus, a BUSD-Margined futures trade will be straightforward to calculate in terms of fiat money. If a trader doesn’t want to calculate for US dollars but is using BUSD, they can check the exchange rate of 1USD to the value of their desired currency and feel confident that BUSD maps directly to the same exchange rate.
Final Thoughts
With the introduction of BUSD-margined contracts, users can now diversify their stable coin exposure between BUSD and USDT. If you hold large sums of stablecoins, a split between BUSD and USDT might be a good idea for diversification, convenience, and overall trading strategy purposes.
No matter what sort of derivatives (futures or margin) trade you look to participate in, always be aware of the extreme financial risk posed. And while the potential for high rewards is prevalent, the risk is just as fraught. Check out our article on Responsibly Trading to find a better idea of what we’re talking about here. As always, Binancians, please trade with care!
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