Understanding Binance Dual Saving Products

[danglongbtc]

Hello bitcointalkers,

Upon searching about Binance dual saving products here, I couldn't find a proper discussion. So, I thought of creating one thread here. Well, this is for those who are accumulating their Bitcoins gradually, eventually.

According to Binance:
How does this work in practice?

Let’s say you have 1 BTC at a price of $10,000, and you subscribe to a 30-day Dual Savings product with a 2% rate of return. The strike price is set to $12,000.

30 days later, one of two things will happen:

- If BTC is above $12,000, your 1 BTC is paid out in 12,000 BUSD plus the 2% interest worth 240 BUSD. You now have 12,240 BUSD.
- If BTC is below $12,000, you get your 1 BTC back plus the 2% interest worth 0.02 BTC. You now have 1.02 BTC.

Now, here is the recent 20th dual saving product from Binance:



Suppose, I am investing 1 BTC for 25 days with the strike price of $19,200 (fixed by Binance). I will be getting ~4.11% at the end of the term. At the end of the term, let's take settlement price is $21,000. Therefore, according to above-mentioned explanation, I will get 19,200 BUSD + 863 BUSD = 20,063 BUSD while the current price will be $21,000 where I will be bearing $937 loss. So, this is where I want to be corrected if I am wrong! If I am correct, I think this is indeed a risky scheme. What do you think about the same?

My experience with Binance USDT saving product:

Invested: 500 USDT on 11.18.2020
Duration: 22 Days
Annualized interest: 52% [3.13% for 22 days]
Strike price: $17,250
Settlement date: 12.12.2020 - Today
Settlement price: $18,150
Final yield: 515.65 USDT

So, I am unable to understand Binance's explanation in this case as settlement price exceeded strike price. Or, those grater and less than strike price conditions are not applicable to USDT products? And, why would even they are in need if products are in USDT, not in BTC at the moment. Can you please guys give this a time and provide your statistics here? It will be really appreciated and beneficial to all bitcointalkers.

[MoreStamps.Global]

It seems strike price and settlement price don't stand for USDT products. Have you tried their any BTC product?

[o_e_l_e_o]

If I am correct, I think this is indeed a risky scheme.

You are correct, and it is indeed a risky scheme. Also, your numbers look a little off in the example you have provided.

Let's say you invest 1 BTC today at a price of $18,500, with a strike price of $19,200. If bitcoin rises significantly, then the most you are every going to get out is 19,200 BUSD plus 2% interest, which is 19,584. If bitcoin is above this, then you have lost out. Doesn't matter if bitcoin is $19,600 or $25,000, the most you will ever get is $19,584 of BUSD

Let's say you invest the same 1 BTC at the same price of $18,500, with the same strike price of $19,200. If bitcoin does not rise significantly, then you will get back 1.02 BTC. This might be good if you were going to hold regardless, but if you would have sold and bought back lower, then obviously your bitcoin is locked in so you cannot do that.

Or, those grater and less than strike price conditions are not applicable to USDT products? And, why would even they are in need if products are in USDT, not in BTC at the moment.

Have a read of this page (https://academy.binance.com/en/articles/a-quick-guide-to-binance-dual-savings), particularly the heading "How does BUSD/USDT Dual Savings work?" Since the settlement price was higher than the strike price, then your interest is paid out in the stablecoin rather than in BTC.

[danglongbtc]

If I am correct, I think this is indeed a risky scheme.

You are correct, and it is indeed a risky scheme. Also, your numbers look a little off in the example you have provided.

Let's say you invest 1 BTC today at a price of $18,500, with a strike price of $19,200. If bitcoin rises significantly, then the most you are every going to get out is 19,200 BUSD plus 2% interest, which is 19,584. If bitcoin is above this, then you have lost out. Doesn't matter if bitcoin is $19,600 or $25,000, the most you will ever get is $19,584 of BUSD

Let's say you invest the same 1 BTC at the same price of $18,500, with the same strike price of $19,200. If bitcoin does not rise significantly, then you will get back 1.02 BTC. This might be good if you were going to hold regardless, but if you would have sold and bought back lower, then obviously your bitcoin is locked in so you cannot do that.

Or, those grater and less than strike price conditions are not applicable to USDT products? And, why would even they are in need if products are in USDT, not in BTC at the moment.

Have a read of this page (https://academy.binance.com/en/articles/a-quick-guide-to-binance-dual-savings), particularly the heading "How does BUSD/USDT Dual Savings work?" Since the settlement price was higher than the strike price, then your interest is paid out in the stablecoin rather than in BTC.

Thanks for your detailed evolution. As I am a holder, I think interest paid in terms of BTC won't affect me.

As the settlement price was higher than the strike price, then your interest is paid out in the stablecoin rather than in BTC.
- As per the explanation provided by Binance, if settlement price is higher than strike price, I was supposed to receive total sum (500 USDT) + interest in BUSD, in my recent experiment. But I received that in USDT which I can't understand why? Therefore, I asked if these rules are applicable to stable coin products.

[o_e_l_e_o]

- As per the explanation provided by Binance, if settlement price is higher than strike price, I was supposed to receive total sum (500 USDT) + interest in BUSD, in my recent experiment. But I received that in USDT which I can't understand why? Therefore, I asked if these rules are applicable to stable coin products.

The stablecoin offerings are in either BUSD or USDT. If you invest USDT, your interest will be paid in USDT (provided the settlement price is higher than the strike price). If you invest BUSD, your interest will be paid in BUSD. In both cases, if the settlement price is lower than the strike price, you will receive BTC instead of the relevant stablecoin.

[magneto]

You have very limited upside while a heap of downside. Binance is the ultimate winner no matter how I look at it, unless you have a very, very specific need to hedge your holdings with this seemingly arbitrary settlement structure.

The only real reason why anyone would use this is for short term speculation, i.e., placing bets on the market. And even then, is this really the most efficient way to go about it?

If BTC soars, you stand to lose BTC unless price at settlement is less than 2% above your strike price. This makes it not worthwhile for long term investors who want a stable amount of BTC. If BTC crashes, then you lose in fiat terms anyhow albeit a ~2% interest rate cushion which doesn't help much - oftentimes you could get paid near that amount in funding rates on derivatives exchanges for holding long positions in bear markets for extended periods.

[danglongbtc]

You have very limited upside while a heap of downside. Binance is the ultimate winner no matter how I look at it, unless you have a very, very specific need to hedge your holdings with this seemingly arbitrary settlement structure.

The only real reason why anyone would use this is for short term speculation, i.e., placing bets on the market. And even then, is this really the most efficient way to go about it?

If BTC soars, you stand to lose BTC unless price at settlement is less than 2% above your strike price. This makes it not worthwhile for long term investors who want a stable amount of BTC. If BTC crashes, then you lose in fiat terms anyhow albeit a ~2% interest rate cushion which doesn't help much - oftentimes you could get paid near that amount in funding rates on derivatives exchanges for holding long positions in bear markets for extended periods.

So, what should one long term holders should do to accumulate bitcoins using their holding amount of bitcoins, according to you?

[magneto]

You have very limited upside while a heap of downside. Binance is the ultimate winner no matter how I look at it, unless you have a very, very specific need to hedge your holdings with this seemingly arbitrary settlement structure.

The only real reason why anyone would use this is for short term speculation, i.e., placing bets on the market. And even then, is this really the most efficient way to go about it?

If BTC soars, you stand to lose BTC unless price at settlement is less than 2% above your strike price. This makes it not worthwhile for long term investors who want a stable amount of BTC. If BTC crashes, then you lose in fiat terms anyhow albeit a ~2% interest rate cushion which doesn't help much - oftentimes you could get paid near that amount in funding rates on derivatives exchanges for holding long positions in bear markets for extended periods.

So, what should one long term holders should do to accumulate bitcoins using their holding amount of bitcoins, according to you?

Hold their bitcoins in a hardware wallet?

It makes no sense for you to limit your upside potential by entering into these contracts, since if you are a long term holder anyway, you want to profit off price hikes and not be capped by the strike price.

And I'm not even mentioning the risk of Binance going bust, or regulatory risks associated with the exchange itself. These may not materialise as risks in the short term, but in the long run they are a possibility to be taken into account for sure.

[o_e_l_e_o]

If you want to increase your bitcoin holdings, then you need to look for a product which pays out only in bitcoin, and not one which will give you a below market amount of a stablecoin instead. There are a variety of products like this out there. The most common are lending accounts, where you deposit your coins to a platform and the platform uses your coins as capital to supply loans to third parties, and pays you a small fraction of the profit they make from the loan repayments.

Having said that, as mentioned above these are not without risk, and a considerable risk at that. Everyone one of these types of account I have seen has included a clause in their Terms of Service absolving them from any responsibility for your coins or repayments. You have to place complete trust in an intermediary to take control and give away your coins, and complete trust in any number of unknown third parties to keep up their loan repayments. If any one of these exit scams, becomes insolvent, shuts down, is hacked, etc. then you can wave goodbye to your coins.

For the sake of a few percent in gains, they are simply not worth it in my opinion. Just hold on to your bitcoin in your own wallet and wait.

[danglongbtc]

If you want to increase your bitcoin holdings, then you need to look for a product which pays out only in bitcoin, and not one which will give you a below market amount of a stablecoin instead. There are a variety of products like this out there. The most common are lending accounts, where you deposit your coins to a platform and the platform uses your coins as capital to supply loans to third parties, and pays you a small fraction of the profit they make from the loan repayments.

Having said that, as mentioned above these are not without risk, and a considerable risk at that. Everyone one of these types of account I have seen has included a clause in their Terms of Service absolving them from any responsibility for your coins or repayments. You have to place complete trust in an intermediary to take control and give away your coins, and complete trust in any number of unknown third parties to keep up their loan repayments. If any one of these exit scams, becomes insolvent, shuts down, is hacked, etc. then you can wave goodbye to your coins.

For the sake of a few percent in gains, they are simply not worth it in my opinion. Just hold on to your bitcoin in your own wallet and wait.

Your facts make sense.

But I am holding them from 2 full years and the total sum is not in fractions. I could have invested them with a known person in our space who guaranteed to provide ~3% per month but I didn't do because of trust issue even though manager is well known. Now when I looked at one of my friend's position with him, he has accumulated 80% in these 2 years which all can be liquidated as well.

So, being a holder, human mind (at least mine) always wonder there must be money working for you if they are eating dust anyway. So, I was looking at various possibilities. If you think providing custodies to these exchanges is risky, it is not entirely safe to go with conventional banks too. However, it seems that exchanges are just here to take your assets, utilize it to gain huge profits and give your a fraction - with risks involved. I think hold will be the only safer option.

[o_e_l_e_o]

I could have invested them with a known person in our space who guaranteed to provide ~3% per month but I didn't do because of trust issue even though manager is well known.

He absolutely cannot guarantee 3% per month. 3% per month compounds to over 42% per year. Even the biggest banks and financial institutions in the world cannot even come close to a guaranteed annual return of 42%. Perhaps he has made such returns for other people, but they certainly are not guaranteed and there will be a risk involved.

If you think providing custodies to these exchanges is risky, it is not entirely safe to go with conventional banks too.

I agree, and that's part of the reason why bitcoin is popular - the ability to have complete self custody of your money and to be your own bank. Having said that, fiat banks are in general still far safer than crypto exchanges in terms of security, hacks, and insurance of stored funds.

If you are desperate to make some percentage returns on your bitcoin, then these savings or lending accounts I've mentioned will let you do that, but you need to be aware that they are not risk free.