Primer - Dual Investment is an investment product that lets users earn interest irrespective of the market direction. It lets users deposit funds to buy or sell crypto assets at future desired prices and dates while earning interest on the deposits.
In order to earn from an investment, the rule is to maximize the profit. This entails buying at a low price and selling at a high price. It sounds simple if only it was so.
Binance offers this opportunity through a customized product called Dual Investment. Let’s understand how users can earn by leveraging the Dual Investment Product.
There are two types of Dual Investment products - Buy Low and Sell High.
Buy Low Dual Investment
Users deposit stablecoins to buy crypto assets at desired target prices on the desired date. Irrespective of whether the target price is achieved or not, users earn the interest in the form of stablecoins.
If the market price is below the target price on the settlement date, the order is filled. The subscription amount plus the interest earned is used to buy the crypto asset at the target price. If, however, the price is above the target price on the settlement date, the order is not filled. The user receives the subscription amount plus the interest.
Sell High Dual Investment
Users deposit crypto assets to sell at desired target prices on the desired date. Irrespective of whether the target price is achieved or not, users earn interest in the form of the underlying crypto asset.
If the market price is above the target price on the settlement date, the order is filled. The subscription amount plus the interest earned is sold at the target price. If, however, the price is below the target price on the settlement date, the order is not filled. The user receives the deposited asset plus the interest.
There are zero trading fees when the buy-sell order gets executed.
Terminologies Explained
1. Subscription Amount – Amount deposited when subscribing to Dual Investment.
2. Target Price - A set price at which you want to execute the buy-sell order.
3. Settlement Date - A set date for the order execution based on whether the target price is reached or not, on the given date at 0800 UTC. The investment return is paid on this date.
4. Settlement Price - This is the market price average in the 30 minutes before 08:00 (UTC) on the Settlement Date. The Settlement Price and Target Price determine whether the order gets executed.
5. Annual percentage yield (APY) - The interest that is paid out on the subscription amount over a time period of one year. For example, if your APY is 36.5%, then an estimation of your daily effective return is 36.5% / 365 days = 0.1%.
6. Subscription Period - The time period from the Subscription date till the Settlement Date.
Risks involved with Dual Investment
The risks involved with Dual Investment are similar to Spot Limit Orders.
In case of high market volatility, if the market price moves further away from the target price, the opportunity to buy or sell at a better price is lost. If the market price ends up dropping further below the executed target price, the asset has been bought at a relatively higher price than the market. Likewise, if the market price ends up rising further above the executed target price, the asset has been sold at a relatively lower price than the market.
There is less flexibility as the subscribed assets are locked and the subscription cannot be cancelled or redeemed earlier than the Settlement Date.
The order execution happens based on the market price on the Settlement Date, not before or after.
Comparison with Spot Limit Order
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For both Dual investment and Spot Limit orders, the order gets executed if the market price and target price are matched. However, in the case of Dual Investment, there is a fixed settlement date and time.
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Spot Limit orders can be cancelled anytime while the subscription amount in Dual Investment is locked till the Settlement Date.
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Zero trading fees if the Dual Investment order gets executed.
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Interest is earned on the subscription in Dual Investment.
Subscribing to Dual Investment
Subscribing to Dual Investment is easy, however, it might take a little extra time to get a grasp of the product. Let’s go through the process of subscribing to Dual Investment. The screenshots have been taken from the Binance Academy’s guide to Dual Investment.
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Select Dual Investment under the Earn option. There is a beginner mode that provides a stepwise guide to help with the subscription.
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Choose the crypto asset that you want to buy or sell.
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Take the Dual Investment Quiz if you are using the product for the first time.
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Choose your settlement (Buy Low/ Sell High)
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Select the target price and the settlement date.
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Enter the subscription amount and agree to the terms and conditions. Click Subscribe and Voila!
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For those who like Video Tutorials, I have you covered with not just one but two videos. There are some interesting comments that might clear some of the doubts as well. Don’t get confused with “Up & Exercised” and “Down & Exercised”. It was the old terminology for Sell High & Buy Low.
Conclusion
Following the markets can be a demanding and challenging task. Dual Investment helps to earn passive income irrespective of the market direction. However, it is important to understand that this is not a principal-guaranteed product.
Check this article from Binance Academy for more info https://academy.binance.com/en/articles/a-quick-guide-to-binance-dual-savings
Link for Dual Investment - https://www.binance.com/en/dual-investment
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