If you’ve been exploring the crypto world for a while, you already know that crypto assets are extremely volatile.
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And it is extreme since some crypto coins experience swings ranging in multiple percentage points. And no matter how fruitful it may look, a sudden dip can easily erode your portfolio’s value. However, Major crypto exchanges such as OKX have come up with an innovative solution known as OKX Dual Investment.
A Dual Investment like OKX Dual Investment allows you to deposit a cryptocurrency and earn yield based on two assets. Commit your crypto assets, lock in a yield and earn value if your committed assets’ value increases. The return you get depends upon the outcome of your bet at the expiry date.
If the value of the holdings increases such that your earnings exceed the savings rate, you’ll get a higher return. If it does not happen, you’ll still get the yield from your savings. So whether the market is going in your direction or not, you will still earn.
By the end of this post you will understand the following;
1. What is dual Investment (OKX dual Investment)
2. Terminologies and terms used for dual investment
3. The Pros and cons of dual investment.
4. How OKX dual investment works.
What is Dual Investment
Dual Investment is a non-principal protected structured product with enhanced yield, involving two different currencies. Upon subscription, you can select the underlying asset, deposit currency, subscription amount, and delivery date. Your return will be denominated in the deposit currency or alternate currency, depending on the below conditions.
Dual Investment is a wealth management product realized by using options, which is a non-guaranteed floating earning product. The yield is clear and fixed when users buy the product, while the settlement currency can be varied at expiring by date. At expiration by date, the settled crypto depends on the comparison between settled price and strike.
It is a great way to earn passive income no matter which direction the market goes. You have the chance to hedge a fixed price, but also profit from the relative price distances of two cryptocurrencies.
Before explaining further, there are some terminologies listed that you’ll need to know.
- Investment asset is the currency you subscribe with.
- Expiry date– This is when you can redeem your crypto with the interest that you earned. The expiration date is the final offer’s day. You’ll know your final earnings and settlement asset on the expiration day.
- Strike price– The price threshold that determines which settlement currency you’ll get paid in. The strike price is the price you set or choose to compare with the settlement price on the expiration date.
- Settlement price– The price of your crypto at the expiry date. It’s calculated using an index of some of the most liquid spot BTC-USD market pairs. The settlement price is the average index asset price 1 hour before the expiration: between 07:00 and 08:00 UTC.
- Rate of return– The fixed interest you’ll earn when the product settles.
- Term rate is your potential earnings for the investment term. It’s fixed and used to calculate final earnings. You’ll see the exact rate in the order confirmation.
- The annualized rate of return– The interest you’d earn if you’d lock your crypto in a Dual Investment product for a year. For example, if your annualized rate of return is 365%, then an estimation of your daily return is 1%Est. rate (APY) is your potential earnings for the year. APY equals the est. term rate divided by the term itself and multiplied by 365.
- Settlement asset is the currency you get earnings in. It can be one of two offer assets, for example, BTC or USDT for BTC or BTC-U offers. The actual settlement asset depends on the settlement and strike prices on the expiration date.
- Term the several days from the earnings calculation start date to the expiration date. Let’s say you started your Dual Investment at 07:00 UTC on December 10, 2021. Earnings calculation started at 08:00 UTC. If the offer expires at 08:00 UTC on December 17, 2021, the term is 7 days.
THE OKX DUAL INVESTMENT PRINCIPLES AND PLAN
Through this product, users holding BTC can hedge their bitcoin holdings. The main idea is that if the settlement price is higher than the strike price, the product is settled in USDT.
Otherwise, the product is settled in BTC. What that means is, if the product settling is in USDT, users can effectively sell their BTC higher than the current spot price at the expiry period. The higher the strike price and the shorter the period, the lower the yield. Similarly, the lower the strike price and the longer the period, the higher the yield.
To explain this more aptly, Let’s say a user has 1 BTC at for 10,0000 and subscribes to a 30-day Dual Investment product with a 2% rate of return. The strike price is set to $12,000.
After a month, one of the two outcomes will happen:
- If BTC is above $12,000, the user’s 1 BTC is paid out in 12,000 USDT plus the 2% interest worth 240 BUSD. The user now has 12,240 USDT.
- If BTC is below $12,000, the user’s 1 BTC returns the 2% interest worth 0.02 BTC. The user now has 1.02 BTC
Moreover, if settlement price is lower than strike price on the expiration date, you’ll get your investment amount multiplied by (1 + term rate) in BTC or ETH respectively. If settlement price equals or exceeds strike price, you’ll get your investment amount multiplied by strike price and (1 + term rate) in USDT.
For example, you invested 5 BTC with strike price of 27,500 USDT and 2.5% term rate. If the settlement price is 26,500 USDT, you’ll receive 5 * (1 + 2.5%) = 5.125 BTC. If the settlement price is 28,500 USDT, you’ll receive 5 * 27,500 * (1 + 2.5%) = 140,937.5 USDT.
Now, let’s say you invested USDT. If settlement price is lower than or equal to strike price on the expiration date, you’ll get your investment amount divided by strike price and multiplied by (1 + term rate) in BTC or ETH. If settlement price exceeds strike price, you’ll get your investment amount multiplied by (1 + term rate) in USDT.
NOTE: For the OKX Dual Investment plan, you will need a minimum of 500 USDT or the equivalent in BTC or ETH to invest. You can use BTC for BTC offers, ETH for ETH offers, and USDT for BTC-U and ETH-U offers. OKX also provides more choices for a strike and an early expiry date. And has the option for early redemption and custom.
Currently, OKX Dual Investment includes four products and is supported by three currencies for purchase:
BTC Dual Investment only supports BTC purchase, ETH Dual Investment only supports ETH purchase, BTC-U/ETH-U supports USDT purchase.
Since Dual Investment is to help users sell call or put options in the market, revenue comes from premium.
You Can Also Read : OKX and Yield Farming on Centralized Exchanges.
The OKX dual investment Est APY ranges from 0.7% to over 200% across all currencies available on the okx dual investment portal. U can check it from here
Risk: The main risk of Dual Investment is market volatility. If prices change drastically, it’s more complicated to predict future prices and the gap between market and strike prices at the expiration date.