According to the exchange, BFUSD's APY will never drop below zero, and it's intended for passive earnings via futures trading.



When Binance launches BFUSD, users will be able to earn incentives in a passive manner.
The cryptocurrency exchange claims that holders would be shielded from any negative returns.

Binance has introduced BFUSD, a new kind of reward-bearing margin asset that customers may retain or trade for futures to earn rewards passively. At 2:00 UTC tomorrow, November 27, BFUSD will formally debut.

Binance has made it clear that only qualified futures customers in supported markets will be able to purchase BFUSD after the official launch. Some jurisdictions, like the US, have restrictions on the futures platform.

Explain BFUSD.

A representative from the exchange said that BFUSD is both a margin instrument for futures trading and an asset with the potential to provide passive benefits.

Plus, regardless of whether you trade futures or not, BFUSD holders will still benefit from a daily accruing Base APY. In addition, the day's APY will be greater for traders who qualify for USDⓆ-Margined Futures trading activity.

USDⓆ-Margined Futures are contracts for futures trading on Binance that use stablecoins like USDC or USDT as principal and settlement funds.

They remove the risk of cryptocurrency collateral's inherent volatility, providing traders with a more consistent trading environment.

Avoid BFUSD Like the Plague!
It has been made clear by Binance that BFUSD is not a stablecoin and so cannot be traded or withdrawn from a Binance futures account.

You can only use BFUSD as margin for futures trading on Binance. You may redeem it for USDT on the exchange.

Strategies for BFUSD that Generate Returns
BFUSD has two ways to make money:

Delta uses the spot and futures markets to hedge cryptocurrency and earn financing fees.
When you stake Ethereum, you're hedging your bets against the price volatility of the market with a futures contract. The ultimate convergence of spot and futures prices is guaranteed by funding fees. In a positive funding rate, long-position holders pay shorts with funding fees, while in a negative funding rate, shorts pay long-position holders.

Although they employ delta hedging to provide incentives, BFUSD is distinct from USDe, Ethena's synthetic dollar.

It is up to consumers to decide how to use USDe; the cryptocurrency itself does not provide any benefits. Conversely, BFUSD is an asset that holders of margin may passively profit from.

Your BFUSD Reward Won't Ever Drop Below Zero

To ensure that customers are constantly safeguarded from negative returns, Binance promised that the APY/reward rate of BFUSD would never dip below zero.

The BFUSD Reserve Fund will get a share of the overall APY earned during good times; however, Binance intended BFUSD to do the opposite, which means that the APY for BFUSD will be negative when the market is bullish and the financing revenue fee is negative.

This implies that the Reserve Fund will cover the negative funding rate, so users won't have to worry about paying for it.

Interest Rate History for BFUSD
From November 20th to the 25th, according to the data we have, the base annual percentage yield (APY) for BFUSD varied between 12% and more than 35%.

In the same time frame, the increased APY for futures-qualified traders hit 15% and more than 47%.

Additionally, Binance said that out of every 365 days, the financing rate for the ETHUSDT trading pair has been positive, based on historical statistics. Since Binance Futures debuted in 2019, financing fees have been mostly positive on a quarterly basis.

This provides a solid foundation for BFUSD to consistently yield APY.

Benefits to Users and Distribution of Funds

The majority of Binance's total annual percentage yield (APY) on BFUSD will be distributed as USDT daily payouts. Also, the Reserve Fund will get some of this.

The initial seeding of this Reserve Fund will be 1 million USDT. Its purpose is to cover any negative financing rates and facilitate hedging methods. Reportedly, user protection will be adequately covered by the reserve money allotment.

Both the base and enhanced annual percentage yields (APYs) for BFUSD are determined every day and are subject to change. The rates at which BFUSD holders might expect rewards are highly dependent on funding rates.

When market sentiment is optimistic, longs may pay shorts a higher financing rate on futures bets, which in turn increases the reward rate.

Fees for Buying and Selling BFUSD
Although they are subject to change, the current purchase and redemption costs for BFUSD are 0.1%.

Users will be able to purchase BFUSD at no cost from tomorrow, November 27, through December 26, as part of the campaign, which offers the chance to earn 100,000 USDT in bonus APY and USDT vouchers.

You will only be able to transact using USDT when BFUSD debuts tomorrow. All transactions, including purchases, rewards, and redemptions, will be settled in USDT.

According to Binance's official release, the amount of BFUSD that each user may get is proportional to their VIP status.

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