A Tutorial of How to Use Matrixport Dual Currency Product in Volatile Market
Do you need a guide in investing in a volatile crypto market? Matrixport Dual-currency product (DCP) helps you build wealth!
This article explains the fundamental logic, application scenarios, and risk control of the Matrixport DCP, to quickly equip you with the necessary knowledge on DCP to earn passive income.
What is “DCP”?
DCP is a non-principal guaranteed investment product comprising two cryptocurrencies. DCP has two directions — “sell high” and “buy low”. By comparing the linked price and the settlement price to decide the settlement method, DCP allows users to enjoy stable earnings from either of the two currencies.
In conclusion, “sell high” means selling a call option, and “buy low” means selling a put option. DCP has a unique advantage over other investment products. Compared with futures trading, DCP is free from the liquidation risk of price volatility before reaching the linked price; compared with spot trading, DCP saves the maker fee for the user.
However, it is worth noting that, even in the same investment direction with the same investment period, different linked prices of DCP will lead to different yields. In the “sell high” direction, the yield is higher when the linked price is closer to the spot price; in the “buy low” direction, the yield is higher when the linked price is farther from the spot price. Higher yield also indicates higher risk, so investors must be highly sensitive to market trends and changes.
How does Linked Price Affect Yield?
Here are some examples:
Scenario 1: Sell High
On July 3, User A purchased a “sell high” BTC-USDT product for 9.1 days (to be settled on July 12) for 1 BTC. The current price of BTC is $60,954 and the linked price is $63,000. The annualized yield is 27.22% (Yield 0.67%).
- On July 12, if the price of BTC < $63,000 (linked price), will be settled in BTC.
Returns = Purchase amount * (1+Yield)
=1*(1+0.67%)
=1.0067 (BTC)
Potential Benefit: If the BTC price fluctuates between the linked price and $60,548 during the holding period, USDT-margined and BTC-margined values will grow, therefore A can earn more BTC while holding it.
Note: $60,548 is the breakeven point of the example, for more details please visit the Matrixport DCP page.
Potential Risk: If the BTC price drops below $60,548 on the expiry date, A will also earn more BTC, but the decline of BTC price will lead to the deterioration of USDT that it is linked to.
- On July 12, if the price of BTC > $63,000 (linked price), BTC will be sold at $63,000 and settled in USDT.
Returns = Purchase amount * linked price*(1+Yield)
=1*63000*(1+0.67%)
=63000*1.0067
=63422.1 (USDT)
Potential Benefit: If the BTC price breaks below $63,000 (linked price) and continues to drop on the expiry date, A will successfully sell high BTC and earn a high yield.
Potential Risk: If the BTC price breaks above $63,000 (linked price) on the expiry date, BTC will be sold at the linked price. If the BTC price continues to rise and breaks $63422.1 (breakeven point), the yield during the holding period will not make up for the spread between the BTC sell price and the spot price.
Scenario 2: Buy Low
On July 3, User A purchased a “buy low” BTC-USDT product for 1.1 days (to be settled on July 4) for 10,000 USDT. The current price of BTC is $60,954 and the linked price is $59,500. The annualized yield is 28.09% (Yield 0.08%).
- On July 4, if the price of BTC <$59,500 (linked price), A will buy BTC at the linked price.
Returns = Purchase amount/linked price * (1+Yield)
=10000/59500*(1+0.08%)
=0.16820 (BTC)
Potential Benefit: A will successfully buy low if the BTC price breaks below $59,500 (linked price) temporarily and quickly rebounds on the expiry date.
Potential Risk: If the BTC price breaks below $59,500 (linked price) and continues to drop, A will buy BTC at a higher price.
- On July 4, if the price of BTC > $59,500 (linked price), A will not be able to purchase BTC, and thus the product will be settled in USDT.
Returns = Purchase amount * (1+Yield)
=10,000*(1+0.08%）
=10,008 (USDT)
Potential benefit: If the BTC price fluctuates slightly during the holding period and does not reach the linked price on the expiry date, A will enjoy an annualized yield of 28.09%.
Potential Risk: If the BTC price breaks below the linked price during the holding period, even if on the expiry date the price is higher than the linked price, A will not buy BTC at the linked price at times.
DCP Application Scenarios
By choosing Dual Currency products according to market conditions, users can fulfill their needs for take-profit, bottom fishing, and stocking.
- If the user predicts a volatile aftermarket, by choosing a DCP with an appropriate holding period and a suitable price between the higher and the lower limits, the user may gain a higher yield.
- If the user believes the market will drop in the short term and rebound in the long term, choosing a “buy low” product with an appropriate holding period will allow him/her to not only bottom fish, but also gain financial income.
- If the user foresees a bullish aftermarket, choosing a “sell high” product may allow him/her to stop profit at a high point.
However, to gain higher earnings, more accurate market judgment will be needed. Decision-making without careful consideration might lead to unnecessary loss.
So far, Matrixport DCP supports 12 currencies such as BTC, ETH, ARB, BCH, BNB, ORDI, and OP over a wide range of holding periods from 0.1 to 287 days, and allows for early redemption. Users can choose products according to their needs.
Disclaimer: The above content is for informational purposes and for reference only. The content does not constitute investment advice, an offer to sell, or a solicitation of an offer to buy, to residents in the Hong Kong SAR, the United States, Singapore, and other countries or regions where such offers or solicitations may be prohibited by law. Digital asset transactions can be extremely risky and volatile. Investment decisions should be made after careful consideration of individual circumstances and consultation with financial professionals. Matrixport is not responsible for any investment decisions based on the information provided in this content.
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