Dual investment is one of the ways to passive income. Like all investment products, dual investments have their advantages and associated risks.
Dual-currency products are widely known in the traditional banking sphere. Many funds and banks provide such instruments. Let’s consider what dual investment is in the sphere of cryptocurrency and how it can help save and multiply investors’ money.
What is dual investment?
In this case, the investor invests his/her money with certain pre-specified conditions. A contract is signed, where it is specified for how long and at what rate of return the investor sends the money. However, the interest rate in this case is higher than that of a standard deposit. The contract also specifies the currency in which funds are returned. The terms of conversion are also different. As a result, for the period of time specified in the contract the investor’s money is frozen.
So, when entering into a contract or subscription, the user determines the main currency, the currency of the deposit, the amount and the term of the deposit. The investor can also choose the return currency.
Dual-currency investments are divided into two types.
«Sell High products». In this case, the product will be exercised if the Settlement price exceeds the Target price.
«Buy Low products». Accordingly, in this case the product will be exercised if the Settlement price is lower than the Target price.
As a result, in both cases, if the product is not exercised, the investor will receive a refund in the currency of investment. However, when the product is exercised, the invested funds are returned in an alternative currency. The spot price of the asset is used as the settlement price.
Advantages of dual-currency investments
Dual-currency products are one of the protective instruments for funds, especially in times of strong volatility. They can also be seen as passive investments with non-guaranteed income. In addition, there is an opinion that dual-currency deposits generate more profits than other passive investing instruments. Dual-currency investments are also considered safe compared to spot trading in a rapidly changing market.
In addition, there are various conditions of the deal. For example, what currencies are involved in the deal, for how long the funds are blocked, the percentage of return. All this will help investors to choose a deal with minimal risks for him/her.
So, this tool appeared on the cryptocurrency market relatively recently. However, many investors have already successfully added dual-currency products to their portfolios. Next, let’s consider dual-currency investment on the example of the Binance exchange.
Dual-currency investment on the Binance exchange
Many exchanges already offer dual-currency products to investors. Let’s consider this tool in more detail on the example of the Binance cryptocurrency exchange.
To use the dual investment tool, you need to log in to your Binance account and go to: Earn – Dual Currency Investments. Here you can find products with different major assets. For example, BTC, ETH, SOL, MATIC, ADA, BNB and a number of other cryptocurrencies. Next, you need to select the annual profit, the settlement date and the target price. There are different conditions for all products.
After the expiration date, the pre-selected asset will arrive in the spot wallet. This takes up to 48 hours on average. The total amount is calculated on the spot price of the asset.
How you can calculate profit
When the product is exercised, the return of investment funds and the percentage of profit will be made in the alternative currency. The following formulas can be used to calculate the income:
Sell High — (Subscription Amount * Target Price) * [1 + (APR% * Deposit Days / 365)]
Buy Low — (Subscription Amount / Target Price) * [1 + (APR% * Deposit Days / 365)]
If the product is not exercised, the investor receives his/her funds back and a percentage of the profit in the deposit currency. The final amount is calculated according to the following formula:
Subscription Amount * [1 + (APR% * Deposit Days / 365)].
Risks
The longer the period of blocking of funds, the higher the percentage of return. However, there are risks associated with it as well. It is impossible to accurately predict the movement of the market. Cryptocurrencies are very volatile. Therefore, if the investor makes a mistake in his/her forecasts, there is a probability of leaving the transaction with a loss.
In addition, it is always worth bearing in mind the risks involved, as this product cannot be closed prematurely. It is impossible to cancel the subscription or close the deposit precociously. Therefore, the investor should study the conditions of the deposit and make his/her own market analysis to minimize the risks of losing funds.
Conclusion
So, dual-currency products are another tool for passive investing. After weighing all the risks, users can decide whether to include this product in their investment portfolio or not.
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