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Binance launches token with APY that will ‘never go below zero’
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Binance, one of the largest cryptocurrency exchanges in the world, announced the launch of BFUSD. This is a new asset that should offer users the opportunity to earn passive rewards. With estimates reaching 47% APY, according to Binance itself, the launch of BFUSD excited the market.
As the Binance announcement highlights, the BFUSD will be available from November 27th 2024, at 02:00 UTC, on the exchange itself. The promise is that the token will allow holders to accumulate an annual percentage yield (APY) that, according to the broker, “will never fall below zero”.
According to Binance, BFUSD should not be confused with a stablecoin. This is because it is not possible to withdraw the token from futures accounts or traded on open markets. Instead, BFUSD will be exclusively intended for use as margin in futures trading on the Binance platform and can only be redeemed as USDT.
The idea is to provide a more stable trading experience, using stablecoins like USDC or USDT indirectly.
Token has nothing to do with stablecoin, says Binance
Additionally, BFUSD holders will be able to enjoy a base APY that accrues daily, even if they are not actively trading. During the period from November 20th to 25th, Binance stated that the base APY varied between around 12% and over 35%, while the Boosted APY reached between approximately 15% and over 47%.
One of the main attractions of BFUSD is the promise that the APY will never be negative. Binance has established a reserve fund, initially fueled with 1 million USDT. The fund will be used to cover any negative financing rates that may occur during periods of market downturn.
In the announcement, the Binance spokesperson cited that the funding rate for the ETH/USDT pair has been positive in 350 of the last 365 days. Largely because of this, BFUSD APY rewards will be distributed mainly in USDT. But a good part will be allocated to the reserve fund. Thus, the users will not suffer losses during periods of volatility, as if benefit from a stable income.
Binance also said it plans to calculate both base and boosted APY on a daily basis, which should fluctuate with market conditions. In a bullish market environment, funding rates may be higher, resulting in greater rewards for BFUSD holders.
Lastly, although the structure of BFUSD may resemble the Ethena’s “synthetic dollar” USDBinance emphasizes that there are significant differences between the two. While USDe does not generate rewards on its own, the BFUSD is a margin asset that provides passive rewards to its holders. Something that makes it more attractive for investors seeking passive income in an environment where volatility is the great ally, but can also be the great villain.
Binance launches token with APY that will ‘never go below zero’
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Binance launches token with APY that will ‘never go below zero’
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Binance launches token with APY that will ‘never go below zero’
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Binance launches token with APY that will ‘never go below zero’
