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Views: Bi-currency investment is a modern tool that is actively used in the world of cryptocurrencies to generate income while minimizing risks. This investment option is great for any user and the size of their cryptocurrency capital.
Dual Currency Investments - what it is
Dual Currency Investments (Dual Investment) is an investment product that allows investors to profit regardless of how the price of the asset changes. They are based on fixing the purchase or sale price of a selected asset in the future, providing flexibility and the opportunity to earn in both rising and falling markets.
The peculiarity of this instrument is that if you correctly predict the direction of the asset price in a given period of time, this instrument will allow you to extract even higher returns.
Principle of work of bicurrency investments
Bicurrency investments function as follows:
Selection of the underlying asset: The investor determines the cryptocurrency or asset to be traded.
Selecting a target price: The price at which the asset will be sold or bought in the future is set.
Determining the expiration date: The investor selects a date when the trade will expire.
Closing the trade: If the market price of the asset reaches the target price, the trade is closed in one currency; if it does not, it is closed in another.
For example, you invest 1 BTC with a target price of $30,000 and a term of 7 days. If the BTC price exceeds $30,000, the payout will be in dollars; if the price is lower, you will receive BTC with a bonus for using the instrument.
Bi-currency investments on cryptocurrency exchanges
Centralized crypto platforms offer a wide range of assets for bi-currency investments and flexible investment options.
Binance
Binance offers one of the most convenient services for bicurrency investments. Here, users can:
Choose from a wide range of cryptocurrencies.
Set flexible target prices and terms.
Get transparent yield calculations before investing.
The service also provides yield forecasts and reminders to close the deal.
Bybit
Bybit also offers bicurrency investments, focusing on a simple interface and favorable terms:
Access to popular cryptocurrencies.
Competitive interest rates on investments.
Automatic notifications of transaction results.
The tool on Bybit is suitable for both beginners and experienced traders.
Advantages and disadvantages of bi-currency investments
Any investment in cryptocurrency has its advantages and disadvantages.
Advantages
1. High profitability
The cryptocurrency market is characterized by high volatility, which allows investors to earn significant returns in a short period of time.
Potentially higher returns compared to traditional fiat currency investments.
Portfolio diversification
The ability to combine cryptocurrency assets with traditional instruments to reduce risk.
Investing in different cryptocurrencies allows you to spread risks and increase the potential for returns.
2. Accessibility for a wide audience
Bi-currency cryptocurrency investments often have a low entry threshold, making them accessible to private investors.
Cryptocurrency platforms provide user-friendly interfaces for dealing with such products.
3. The global nature of cryptocurrencies
Cryptocurrencies are not subject to the restrictions of a single country, making it possible to participate in the global market.
Investors can choose between pairs with a cryptocurrency and fiat (e.g. BTC/USDT) or pairs with two cryptocurrencies (e.g. BTC/ETH).
4. Innovative tools and automation
A multitude of cryptocurrency platforms offer automated strategies for bicurrency investments.
The use of smart contracts guarantees transparency and fulfillment of transaction terms.
5. Passive income opportunities
Platforms often offer fixed returns for a certain period, which is attractive for investors who want to minimize participation.
Combining it with DeFi (decentralized finance) technologies allows you to generate additional income.
Disadvantages
1. High risks due to volatility
Cryptocurrencies are known for their sharp fluctuations, which can lead to significant losses.
Incorrect forecasting of rate movements can result in the loss of a significant portion of funds.
2. Lack of capital protection
Cryptocurrency investments, including bi-currency investments, have no government protection, such as deposit insurance.
The investor is fully responsible for his funds in case of market or technical problems.
3. Risk of loss due to hacker attacks
Cryptocurrency platforms are at risk of hacking and loss of funds.
Even trusted wallets and exchanges do not offer 100% protection against cyberattacks.
4. Difficulties in predicting cryptocurrency rates
The movement of cryptocurrency rates often depends on factors that are difficult to predict: news, changes in legislation, actions of major players.
The unpredictability of market behavior requires a high level of analytical skills.
5. Limited liquidity of some cryptocurrencies
Not all cryptocurrencies have high liquidity, which can make it difficult to exchange or sell them.
Smaller capitalization tokens may be susceptible to manipulation.
6. Regulatory risk
Cryptocurrencies are banned or highly regulated in some countries, which may limit their use.
Changes in regulation may affect the availability of cryptocurrency bi-currency products.
7. Commissions and hidden costs
Some platforms charge high transaction or service fees for bicurrency products.
The difference between the market rate and the terms of the investment contract may reduce returns.
8. Dependence on the reliability of the platform
Bicurrency cryptocurrency investments are most often offered by centralized platforms, which adds the risk of bankruptcy or unscrupulous practices.
When bicurrency investments are used
There are a few main uses for these investments:
Rising market
Investors use the instrument to lock in profits from a rising asset without selling it immediately.
Falling market
When prices are falling, traders can earn a steady income in an alternative currency while avoiding losses.
Instead of a contingent order
Bi-currency investments work as a replacement for limit orders, but with the added possibility of profits.
What are the risks of bicurrency investments
1. Market risks
High volatility of cryptocurrencies
Cryptocurrency exchange rates are prone to sudden changes even within a single day. An unfavorable movement in the exchange rate can lead to significant losses, especially if the investment was made based on an erroneous forecast.
Unpredictability of the market
The value of cryptocurrencies is affected by factors that are difficult to predict: news, the behavior of major players (whales), regulatory changes, and the general mood of the market.
Risk of loss of returns
If the exchange rate does not reach the desired level, the investor may receive a lower return or even go into a minus if the contract involves automatic conversion of funds.
2. Technological risks
Vulnerability of platforms
Centralized crypto exchanges and platforms for bicurrency investments are vulnerable to hacks and hacker attacks. Losses due to loss of access to funds can be irreversible.
Errors in smart contracts
If a bi-currency instrument is based on smart contracts, errors in their code can lead to blocking or loss of funds.
Technical failures
Problems with the exchange's servers, delays in transaction processing or errors in the platform interface may lead to financial losses.
3. Regulatory risks
Legal uncertainty
Cryptocurrencies have different legal status in different countries. Bans or increased regulation in a particular jurisdiction may restrict access to platforms for investment or affect the value of cryptoassets.
Sanctions risk
Using platforms registered in jurisdictions with sanctions may result in blocked accounts and loss of funds.
4. Liquidity risk
Insufficient liquidity of a pair
Some cryptocurrencies or their pairs may be low liquidity. This makes it difficult to buy or sell an asset at the desired rate and can lead to significant financial losses.
Market Manipulation
In low-liquid markets, large players can manipulate the exchange rate, resulting in significant price fluctuations.
5. Financial risks
Lack of capital protection
Bicurrency investments in cryptocurrency do not have insurance, as it happens with bank deposits. Capital losses are possible in case of unfavorable market conditions.
Hidden fees
Some platforms may charge additional fees for using the product, which reduces the real return on investment.
Risk of asset depreciation
If one of the cryptocurrencies in the selected pair completely loses its value (for example, due to a project scam), the investor may lose all the invested capital.
6. Risk of dependence on the platform
Platform reliability
Bicurrency investments are most often offered by centralized platforms. If the platform goes out of business or declares bankruptcy, the investor will lose their funds.
Risk of fraud
Unreliable platforms or new projects may turn out to be fraudulent schemes aimed at misappropriating investors' funds.
7. Psychological risks
Emotional decisions
High volatility of cryptocurrencies can cause strong emotional reactions, causing investors to take rash actions, such as prematurely closing a position or taking unreasonable risks.
Stress from high uncertainty
Constant rate fluctuations and the need to monitor the market can cause stress, especially for inexperienced investors.
8. Macroeconomic risks
Impact of global events
The cryptocurrency market reacts to global events such as economic crises, political instability or changes in countries' monetary policies.
Bitcoin Correlation
Most cryptocurrency assets are correlated to bitcoin (BTC). If its exchange rate drops significantly, it can affect the entire market, including the currencies chosen for investment.
Conclusion
Bi-currency investments are one of the most flexible and profitable types of investments in the cryptocurrency sector, providing traders and investors with opportunities to capitalize on market changes. Despite the risks associated with them, they can be a powerful addition to your money management strategy. By properly understanding the principles of operation and taking into account the market situation, you can minimize the downsides and maximize the benefits.
Frequently Asked Questions
1. What do I need to start working with bicurrency investments?
You need to register on an exchange that supports this instrument and fund your account.
2. Which cryptocurrencies are available for bi-currency investments?
Usually popular coins such as BTC, ETH, USDT and others are available.
3. Is it possible to know the profit in advance?
Yes, exchanges provide accurate return calculations before making a transaction.
4. What is the minimum investment period?
Usually from 1 day, but it depends on the conditions of a particular exchange.
5. What commissions are charged for using the instrument?
Commissions depend on the exchange, but most often they are already included in the calculation of profitability.
