Binance Launches Yield-Bearing BFUSD for Futures Trading

Binance, the largest cryptocurrency exchange by volume, on Tuesday introduced BFUSD, a new margin asset for futures trading that generates passive rewards.

BFUSD will allow holders to earn a base annual percentage yield (APY) daily, and plans to offer higher APYs for active futures traders.

Binance Futures users who hold BFUSD in their Futures Account “will be entitled to receive daily rewards in USDT stablecoin at the daily Base Rate,” the company explained on its blog.

Binance assured users that BFUSD's reward rate or APY "will never go below zero" to safeguard holders from negative returns.

“As it cannot be withdrawn from a Binance futures account or traded on public markets, its structure resembles more of an incentive program as opposed to a stablecoin, with two reward tiers that would see holders accruing a Base APY of 29.18% and a Boosted APY of 38.98%,” Vijay Pravin, the Founder and CEO of bitsCrunch, told The Defiant.

“Users can earn passive income by holding BFUSD or unlock higher reward rates when using it as margin for futures trading,” he added.

The margin asset will be available for purchase on Binance Future starting from Nov. 27 at 02:00 (UTC).

HOW IT WORKS

Unlike stablecoins, BFUSD is non-withdrawable and specific to Binance Futures, using systems similar to delta hedging and Ethereum staking to generate returns.

Delta hedging is a risk management strategy traders utilize to minimize the impact of price fluctuations on a position. This involves balancing spot and futures positions to earn funding fees. The best way to profit with delta hedging is if your stock continues to increase in value.

BFUSD access will be limited to eligible users in supported markets. To mark the launch of the new reward-bearing margin asset, Binance Futures is offering a few limited-time promotions for its users.

This includes a Zero-Fee Purchase, where eligible users can acquire BFUSD without incurring any fees during a specific promotional period. A second promotion comprises 10% Bonus APY, in which Eligible users can earn an additional 10% annual percentage yield on their BFUSD holdings.