What is Dual Currency-ETH, and how to invest?
Written by Tracy Chen
Updated at July 6th, 2023
Dual Currency Product is a non-principal protected investment product with floating return. The yield of the product is secured at the time of purchase, while the currency in which the product will be settled changes depending on how the Settlement Price compares with the Linked Price.
A short-term investment product, Dual Currency could potentially provide very high return. We have also designed it with a selection of tenors, catering to your varying risk appetite.
For ETH dual currency products, the Investment Currency is ETH - i.e. you purchase the product with ETH. The Settlement Currency could be either ETH or USDC, depending on how the Settlement Price (ETH’s price at the time of settlement; a detailed calculation method is provided below) compares with the Linked Price: if the Settlement Price is higher than the Linked Price, you will receive the return in ETH; if the Settlement Price is lower than the Linked Price, you will receive the return in USDC.
Investment Currency is the currency in which the investment is made into the product. In Dual Currency - ETH, it would always be ETH.
Settlement Currency is the currency that you will receive when the product expires. It can be either ETH or USDC, depending on how the Settlement Price compares with the Linked Price.
Expiry Date is the date when your investment product is settled. Your return from this product will be automatically credited into your account on this day.
Yield is the income returned on an investment. It is expressed in percentage and is used to calculate the Settlement Amount.
Annualized Yield is calculated as the equivalent annual return you get if you continue purchasing this product with the given yield for a whole year. Its calculation formula is: Annualized Yield = Yield / (Expiry Date - Today) * 365
Linked Price is a benchmark price. On Expiry Day, the Settlement Price will be compared against this benchmark price. If the Settlement Price is below the Linked Price, the product will be settled in Investment Currency (i.e. ETH in this case); otherwise, it will be settled in USDC.
Settlement Price is the average of the Settlement Index in the last 30 minutes before 16:00 (UTC+8) on Expiry Date.
Settlement Index is derived from seven leading ETH-USD exchanges, including Bittrex, Bitstamp, Coinbase Pro, Gemini, Kraken, Itbit and LMAX Digital.
Let's take a look at how the Dual Currency Product works:
Here we have a ETH/USD product with the parameters as follows:
- Linked Price: 200
- Expiry Date: 25-May-2020
- Yield: 5%
- Annualized Yield: 51.4%
- Investment Currency: ETH
On 16-May-2020, Alice bought 1 ETH notional of the above product.
On 25-May-2020
- If ETH weakens between May 16 and 25 and the Settlement Price is below USD 200, Alice receives her original investment and the 5% yield in ETH. Therefore, she receives 1*(1+5%) =1.05% ETH.
- If ETH rallies between May 16 and 25 and the Settlement Price is at or above USD 200, Alice receives her original investment and the 5% yield in USD. Therefore, she receives 200 + 200 *0.05 = USD 210.
Simply put, Alice will be guaranteed a 5% yield on the expiry date. The only uncertainty is whether she will receive the return in ETH or USDC, depending on where ETH/USD stands on the expiry date.
There is no prerequisite on your Identity Verification level to purchase this product . Once you have assets no less than the minimum purchase quantity in your account, you are free to invest. However, we do suggest that you review the product specifications carefully. You’ll also be asked to take a quick quiz before making your first investment to ensure that you have fully understood the product .
On the Expiry Date, if the Settlement Price is below the Linked Price, the product will be settled in the Investment Currency, i.e. ETH
On the Expiry Date, if the Settlement Price is at or above the Linked Price, the product will be settled in USDC. USDC is a fully collateralized US Dollar stablecoin, based on the open source fiat stablecoin framework developed by CENTRE. It's 1:1 pegged to the US Dollar. Currently USDC is claimed to be No.2 stablecoin next to USDT by outstanding balances. USDC is listed on most major exchanges, including Binance, Huobi, Coinbase, etc.
It's irrevocable after the purchase is successful. You will hold the product till the Expiry Date.
No early redemption is allowed. It will be settled by 16:30 UTC+8 on the Expiry Date.
The only uncertainty is the currency that the product will be settled in, which is determined by how the Settlement Price compares with the Linked Price. The risk of this product mainly comes from the volatility of the market: the higher the volatility, the harder it is to predict the Settlement Price and where it might be compared with the Linked Price on the Expiry Date.
We provide products with different Linked Prices to cater to customers' varying risk appetite. Generally, products with higher Linked Prices are more conservative, in that they normally have lower annualized yield but also carry lower risk. On the other hand, products with lower Linked Prices normally provide higher yields, but also carry higher risk at the same time.
Yield and Linked Price are two important parameters of Dual Currency Product and would change hand in hand. Highest yield does not always indicate the best option- risks and returns go hand in hand as well.
You will get your principal and return settled by 16:30 UTC+8 on the Expiry Date. It will be credited into your wallet automatically and no manual redemption would be needed.