USDⓈ-margined futures contracts have grown in popularity over the past year as they are easy to use and provide flexibility to trade on multiple markets. On Binance, traders can collateralize USDT or BUSD to trade across various futures contracts (i.e., BTC, ETH, XRP, etc.) without buying their underlying cryptocurrencies.
However, when trading futures with USDⓈ-margined contracts, you must allocate a significant portion of your portfolio to USD-pegged stable coins (i.e., USDT or BUSD) to ensure that you hold enough collateral to meet their margin requirements.
This creates an inconvenience as users must hold the two types of stable assets in their wallets. To solve this problem, we’ve launched a new feature to help users increase their capital efficiency. This innovative feature is called Multi-assets mode.
What is Multi Assets Mode?
Multi-Assets Mode allows users to trade USDⓈ-M Futures across multiple margin assets. Presently, Binance Futures offers USDT-margined and BUSD-margined contracts under the USDⓈ-M Futures product line. With the newly launched Multi-Assets Mode, users will share their margin across USDT-margined and BUSD-margined contracts.
Multi-Assets Mode will help drastically lower margin requirements for hedged positions. For example, if a position in the portfolio is netting a positive return, it could offset the liability of a losing position in the same portfolio. This would reduce the overall margin requirement that is necessary for holding a losing futures position. Thus, the margin balance only reflects the net P&L between positions in the two markets. This new feature only supports the Cross Margin Mode.
Why trade BUSD-margined contracts?
BUSD is a USD-denominated and fully-backed stable coin, pegging each BUSD to 1 USD. BUSD offers faster ways to fund your trades and is acceptable as a medium of exchange, store of value, and payment method across the global crypto ecosystem.
If you hold large sums of stable-coins, a split between BUSD and USDT might be a good idea for diversification, convenience, and overall trading strategy purposes.
Benefits of Multi-Assets Mode: Diversification and Increased Capital Efficiency
Users can diversify across various stable coins and increase their capital efficiency by using the Multi-Assets mode. With this feature, users can share their margin across USD-margined products available on Binance Futures (USDT & BUSD); this is particularly useful when opening positions in the two markets.
Let’s run through a quick example. Assume that you are holding a long-term position of 10,000 BUSD worth of BTCBUSD perpetual contracts @ $50,000 each.
You predict a temporary pullback in Bitcoin and want to hedge the expected downside risk with a USDT quarterly contract. To hedge, you sold 5,000 USDT worth of BTCUSDT quarterly futures at $50,500 each.
Let’s assume that your prediction came true, and Bitcoin plunged 20%. As a result, your position in BTCBUSD perpetual shows an unrealized loss of -2,000 BUSD. However, because you’ve hedged half of your long-term position, profits from the short hedge, which amounts to 1,010 USDT, offset the losses in BTCBUSD Perpetual. As a result, your margin balance is less impacted despite the sharp pullback in prices, reducing the probability of you facing liquidation.
Additionally, the shared margin feature allows traders to arbitrage between the two markets without the need to maintain multiple accounts or margins. Traders would simply deposit margin either in USDT or BUSD in their wallets and can use the same margin asset to open positions in both markets.
What happens when you have a large amount of negative balance?
Under the Multi-Assets mode, when the Asset Wallet Balance (total net transfer + realized profits + net funding fee - commissions) is less than a given threshold, all other stable assets in the USD-margined futures wallet will be automatically converted as margin to cover the deficit. This is also known as Auto Exchange.
For example, if you have a wallet balance of 5000 USDT and a -1000 BUSD balance, this will trigger auto exchange. In this case, the exchange will convert approximately 1000 USDT to BUSD to cover the deficit.
Auto exchange happens periodically, and if the wallet balance of any asset is less than the Auto Exchange threshold, the system will convert the user's surplus assets in the wallet balance to an asset with a deficit balance. The Matching Engine handles the auto exchange process.
Find out more about Auto Exchange on our FAQ page.
With the introduction of Multi-Assets Mode, users can now diversify their stable coin exposure between BUSD and USDT. Additionally, this feature also allows arbitrageurs and sophisticated traders to efficiently manage their margin and P&L. Making it an ideal product for long-term traders, arbitrageurs, and hedgers.