Updated: Oct 20, 2021
Cryptocurrency trading is booming. The University of Chicago reported in July that 13% of Americans bought or traded crypto in the last twelve months. According to this research investors in digital currencies tended to be younger, but they were also far more diverse in terms of race, gender, and ethnicity than investors in retail stocks. In fact, it is in sub-Sahara Africa that has seen the most growth in this area. According to crypto researcher Useful Tulips, trading volumes in the region increased a whopping 50% in the last twelve months.
It’s not just for fun; in joining the crypto family, investors and traders can see real profits with low entry rates. However, the wild fluctuations in price that can see profit soar also come with high risk.
One major problem that crypto holders face is the instability of blockchain contract values. It is possible for crypto to undergo a significant rise during a trading session yet the value will have dropped drastically before the end of that period. Different trading platforms have been trying to come up with ways to reduce the possibility of loss due to high volatility. Let us be clear, though, that while it is possible to reduce the risk of a loss, it is not possible to eliminate losses completely while trading.
There have been a proliferation of crypto-oriented platforms offering services to traders. Binance is one such platform focused on providing crypto users with optimal (and easy) trading services at reduced risks, and with high levels of security.
The main feature on this platform that we’re going to be looking at is BUSD-margined contracts.
What is BUSD?
BUSD stands for Binance US Dollar. BUSD is simply a stablecoin created by Binance. You might be thinking that BUSD is not the only form of stablecoin on the market, so what’s the fuss all about? However, what makes the BUSD stand out is the fact that it can serve as a cryptocurrency and also has actual fiat value. What we mean by this is that the coin holds actual value in dollars or, to put it more accurately, it is directly linked to the US Dollar. BUSD has the same market value as the USD and one BUSD is equivalent to one USD.
BUSD is more than just a digital currency; block-chain currencies like BTC, ETH, and other digital currencies have to be converted before their value in USD can be determined. However, for BUSD, you don’t need to convert because the value of BUSD is already equal to and backed by the USD.
In simpler terms, the BUSD is a digital form of the USD.
We’re here making declarations that the BUSD has the same value as the USD and it works on the back of the USD - this is not speculation. The BUSD is approved by the United States government and the New York State Department of Financial Services (NYDFS), also for every unit of BUSD in circulation, there is an equal amount of USD representing it in the bank.
The BUSD was created mainly to beat the volatility of the market and reduce the losses traders experience.
BUSD was created by Binance in conjunction with another digital giant, Paxos. The bank accounts that hold the money used to represent BUSD are created by Paxos which is responsible for watching over these accounts. Also, the account is inspected every month as required by the New York State regulations.
The BUSD is also audited every month together with the bank accounts holding the monetary representations of the stablecoin. These monthly audits are to ensure the safety and integrity of the stablecoin and to prevent irregular balance between the stablecoin in circulation and the cash in the bank.
The creation, management, and circulation of BUSD are all strictly regulated; this is one of the main reasons why BUSD is one of the safest options when trading and why it comes highly recommended.
Now let’s take a look at some of the advantages of holding BUSD.
Advantages of holding BUSD
a. Government-regulated and fiat-backed
This is as much a feature of BUSD as it is an advantage. BUSD is not like other digital tokens; it has a physical representation in the form of fiat money in banks under FDIC-insured bank accounts, and also in US Treasury instruments. BUSD is arguably more than just a digital currency; it is also indirectly a form of fiat currency.
If you are holding BUSD it is the same as having USD in your account.
Apart from BUSD being a fiat-backed currency, it is also accepted, backed, and regulated by the U.S. government. BUSD is regulated by the New York State Department of Financial Services (NYDFS). Monthly auditing is carried on both the stablecoins and the accounts holding the money that represents these stablecoins. The auditing process is to further safeguard the integrity and stability of the token.
These monthly audits ensure that the amount of fiat money in the bank is equal to the amount of BUSD in circulation, this ensures that the amount of BUSD in circulation is not more than the monetary equivalent in the bank, because that will lead to presence of excess BUSD and no funds to back it up, causing the stablecoin to have no monetary value.
All these measures set in place are to protect the integrity and stability of BUSD; they make it a very reliable form of digital holding you can use to both invest in and earn in trades.
You can also be certain that has a BUSD holder, you enjoy maximum security on your stablecoin. There is close to zero chances of getting scammed with the regulations in place and there is no danger of your BUSD becoming less than what it should be.
Unlike other forms of digital currency, BUSD doesn’t work on the same market volatility, the only factor that can cause a rise or fall in the value of the BUSD is if there is a rise or fall in the value of the USD. So in terms of volatility, BUSD is very stable and a more secure way to make trades with minimized losses.
b. Reduced fees on transactions
This is added benefit is courtesy of Binance. Binance has established a Zero Maker Fee and Zero Transaction Fee bonus for every BUSD pair and four BUSD stablecoin pairs respectively. Every time you purchase BUSD or make a trade in the Spot and Margin market using BUSD, you get a reduced fee compared to when you’re purchasing or trading other forms of cryptocurrency.
With the Zero Maker Fee policy, you can now initiate maker-trades on any recognized cryptocurrency using BUSD like BTC/BUSD, without having to pay any fee. Also, the Zero Transaction Fee policy allows you to transact with stablecoin BUSD pairs such as BUSD/USDT without paying any transaction fee.
Above are a few advantages of holding BUSD, there are still more benefits that you stand to enjoy from trading with BUSD.
There are other applications of BUSD in trading and one of such applications can be seen in the BUSD-margined contracts.
BUSD-margined contracts are a type of futures contract that is linear and the payoff is in BUSD. A linear contract is one where an increase or decrease in the value of the cryptographic currency being traded is directly collateralized into a particular dollar value per contract and, in this case, the dollar value is in BUSD.
BUSD contracts are not as complicated as they might sound; in fact they are among the most straightforward forms of crypto trading. What characterizes BUSD-margined contracts is the end product, or what you earn in, which is BUSD.
You can start a BUSD-margined contract with any blockchain of your choice, as long as it is supported by Binance, and then end the contract in BUSD. These contracts are among the new features that Binance has introduced to further advance the application of BUSD and also to improve trading options.
Earning in BUSD is very convenient and lets you to know how much money you have immediately after ending a contract - it is a great way to calculate your profits or loss. The introduction of BUSD-margined trade is also another way that Binance has created to beat the volatility of the market because BUSD is backed by the US dollar and it rises and falls only when USD rises and falls. Even in the event of a loss, it will be more controlled compared to when you’re trading with other forms of cryptocurrency, and the loss you will incur will be less.
Also, when operating a BUSD-margined contract, you don’t have to worry about expiry dates, you can open a position and keep it open for as long as you want so far as you have enough margins to operate the active trade.
Types of BUSD-margined Contracts
BUSD-margined contracts can be classified based on their mode of operations into two types:
1. Isolated BUSD-margined contracts
2. Cross variants margined contracts
While both types are similar in their general principle and use of BUSD as a margin, they differ in terms of the restrictions placed on them.
1. Isolated BUSD-margined contract
As the name suggests, this contract refers to a BUSD-margined contract that has been isolated. This means that once you’ve set up a BUSD margin, you can’t retract the margin unless you end the trade. Also, with this type of contract, your BUSD margin in your future account is not touched, only the preset margin that was used to start the contract will be used in the trade.
This form of BUSD-margined contract is more widely adopted because it is safer and protects you from further losses.
2. Cross variants BUSD-margined contract
In this form of contract, trading is not limited to your preset margin but instead, trading continues with the BUSD you have available in your future wallet. This type of BUSD-margined contract has its benefits in that it gives room for more profit to be made, however, it also exposes users to a lot of risks and it can even lead to liquidation.
Advantages of trading BUSD-margined contracts
So, what are the three reasons to trade BUSD?
BUSD-margined contracts are an opportunity for every investor to take part in. The use of BUSD stablecoins as a means of trading is very convenient and safe. There are also major benefits that users can enjoy from trading in BUSD-margined contracts.
One feature of the BUSD is that is a commonly accepted store of value and method of payment, meaning it can be used for more than one type of transaction. With the BUSD-margined contracts, traders now have the option to open more than one margin contract at a time and still earn in BUSD on all contracts, the best part is each contract of these contracts can be in different trading pairs. For example, you can create a margin contract using BTC/BUSD, where the position you’re trading is in BTC but at the end, your payoff will be in BUSD, you can also simultaneously run another margin contract such as ETH/BUSD.
There is usually no limit to the number of different contracts that users can operate at a time as long as you have enough BUSD to fund your operations.
Being able to create multiple contracts increases the chances of making a profit and also decreases the effect of losses. Trading BUSD-margined contracts also give you the opportunity to earn on different positions in different contracts.
It was mentioned earlier that one of the main features of a BUSD-margined contract is that the payoff is in BUSD; meaning that irrespective of what position you start the contract with, your final earnings will be in BUSD which is already equivalent to the U.S. dollars, in a situation like this, there is no need for you to start converting your earnings from one a blockchain currency to fiat money.
Since you don’t need to convert your cryptocurrency to fiat money at the end of the contract, there won’t be a need to pay the conversion fee that is common to other margined contracts. This feature saves you extra cost and makes opening multiple contracts cheaper; imagine opening multiple contracts with 6 different cryptocurrencies and then you have to pay a conversion fee on all 6 after trading, this is can be quite costly. However, with BUSD-margined contracts, your earnings are already in BUSD and the need for any further conversion fee is eliminated.
Cryptocurrency trading and management are already complicated enough, other added complications such as calculating profit and losses should not be included, and the introduction of BUSD-margined contracts eliminates this complication.
Most times, when we conclude a margined contract, we still have to convert our result from cryptographic currencies to fiat money before we can determine how much of a profit or loss has been incurred. However, BUSD-margined contracts have successfully overcome this problem.
BUSD-margined contracts are unique because at the end of the contract both profit and losses are settled in BUSD, which means that at the end of the contract your earnings are in BUSD.
If you’re wondering how being settled in BUSD saves you the stress of calculating your profit or loss in fiat currency, then remember what was said earlier about BUSD; that it is a stablecoin pegged and equivalent to the U.S. Dollar. For every 1 BUSD you make, you have 1 U.S. dollar; so your earnings at the end of a contract in BUSD are in equal proportion to the U.S. dollar.
For further understanding, if your earnings at the end of a BUSD margin contract show you 500 units of BUSD, it means you have 500 U.S. dollars at the end of that transaction.
The introduction of BUSD has made trading easier, safer and more enjoyable to perform. We’ve established that BUSD is a stablecoin created by Binance and Paxos. BUSD is not just any type of stable coin; it is backed by the US government and is equivalent to the value of the U.S dollar.
BUSD-margined contracts have made trading more convenient with a reduced risk of losses. They have their margins as BUSD and they are also settled in BUSD.
There are also BUSD pairs that can be used for trades like the BTC/BUSD, and other types.