Dual Asset: Instructions for use
As many of you know, YouHodler released an exciting new feature last week called “Dual Asset.” We can see it’s an immediate success, quickly becoming one of our most popular features. Despite this, however, we realize there are still many questions - as there should be about an intriguing new product. Hence, we want to take a few moments to answer some of your most burning Dual Asset questions.
What are dual currency investment services?
As much as we’d love to take credit for inventing dual currency investment services, we cannot. These products have been around for many years in traditional finance. As a bridge between TradFi and DeFi, YouHodler is now introducing this wealth generation tool to the world of crypto.
Dual currency investment is a type of non-principal protected investment product featuring floating returns. It involves combining a money market deposit with a currency option that provides a higher yield than just a standard deposit. These dual currency deposits (DCD) as they are called is a foreign exchange-linked deposits.
The principal is repaid after being converted into the alternative currency at the current rate of maturity depending on the spot foreign exchange rate. If the investor has a positive view of the initial currency (e.g., the investor thinks the value of the currency will rise during the term of the deal) then the investor can benefit from higher returns. The returns are higher than normal deposits because the investor is compensated for the higher risks due to foreign exchange exposure.
How does Dual Asset work on YouHodler?
Now that we know where dual currency investment services come from, we can see how YouHodler applied this tool to its platform. The concept is very much the same. However, instead of using the foreign exchange market between two fiat currencies, we use cryptocurrencies and stablecoins.
The process works as follows:
Step 1: Choose a currency pair from the assets list
All major cryptocurrencies are available (e.g. BTC/USDT).
Step 2: Select the input coin
Cryptocurrency or stablecoins - depending on your wallet balance.
Step 3: Choose a staking plan
Depending on your strategy - from one to five days.
Step 4: Profit
The profit you receive depends on whether the settlement price is below the target price or above. If it’s below, you get paid in cryptocurrency. Above, and you get paid in stablecoins. Regardless, you’ll earn some percentage of yield.
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What is the risk of Dual Asset?
As with any investment product on the market, there is some element of risk in Dual Asset. Traders may notice in certain situations that the returns are less than their initial deposit amount (if measured in stablecoins). When measured in stablecoins, the total value of the tokens is not guaranteed due to the potential price fluctuation of the assets. Let’s look at an example to understand.
Mike is a trader using the Dual Asset service with the BTC/USDT pair. The settlement price of BTC at the end of his term is $20,000. Lower than the $21,000 he predicted. Hence, USDT was converted to BTC including the yield gained over the term. Mike might think he lost money from the Dual Asset deal if he is using the settlement price to calculate the USDT value of the BTC returned to him compared to his initial deposit amount of 2,000 USDT.
However, if Mike used that 2,000 USDT to buy BTC at market value that day, he would have received less than he got from the returns from Dual Asset. Even though the final settlement price of the deal was less than he hoped for, Mike still managed to secure more BTC than he originally had. Therefore, the risk isn’t really about losing profit but losing potential profit that could have been made if the market reacted differently.
What are the benefits of using Dual Asset?
If the benefits of Dual Asset aren’t immediately clear to you, then here are a few more reasons why you should try it.
More than just HODLing
We all love to HODL. It’s a great, safe crypto investment strategy. However, you can help that crypto grow even more with Dual Asset. The best part is, that the market doesn’t even have to be volatile. Whether the market is stable or active, you can make returns on your crypto with this service. It’s like a more active version of a savings account or staking product.
Helps you buy the dip
If the settlement price of your Dual Asset deal is lower than the target price, then you essentially get paid in cryptocurrency. Hence, it means you’re “buying the dip” since you’re getting crypto at a cheaper price than when you opened the deal. This sets you up nicely for when the market recovers and your profit later.
Helps you build your stablecoin portfolio
Stablecoins are an essential part of any crypto portfolio. They are a fantastic hedge against market volatility. You can also use them for yield generation on the YouHodler wallet. Dual Asset helps you grow your stablecoin portfolio. If your settlement price is over the target price, then you will receive your yield payment in stablecoins. This provides an easy way to stack stablecoins and earns a passive income.
Enjoy two-sided positions
Why limit yourself to the growth of just one asset when you can benefit from two at the same time? Dual Asset allows you to stand on both sides of the aisle and reap the benefits of two assets simultaneously. Regardless of where the settlement price is at the end of your deal, you’ll benefit from the price of a cryptocurrency or a stablecoin. It’s a win-win situation.
Of course, these are just a few examples of why you should try Dual Asset. Everyone has different strategies and investing preferences. So it’s best you experiment yourself and see why you enjoy Dual Asset services.
What happens to my money during the staking process?
Your money is your money. We never take your funds off the platform without your approval first - unlike some other lenders have done in the past.
The Dual Assets service is similar to staking on Uniswap V3. Your mono-coin input is being split into two coins you chose for the deal. At the end of the deal, depending on the market volumes and volatility you receive one of those coins back, plus interest. We execute the splitting of the coins as well as the final conversion for the payout, on the market using our access to the best available liquidity. YouHodler never pools client funds for staking, farming, or more outside of the platform. Every single transaction is segregated and connected to the exact deal that is initiated, reviewed, and approved personally by you.
We hope the above questions helped you learn a little more about YouHodler’s newest feature. So now that you’re armed with this new knowledge, click the button below to go give Dual Asset a try!