Profit without selling Bitcoin... Will Binance's new product succeed?

▲ Bitcoin (BTC) ©Go Da-sol

Binance has launched a new income-generating product targeting investors who want to earn additional profits without selling Bitcoin (BTC). By utilizing a covered call strategy, it provides Bitcoin holders with opportunities for extra income, joining the trend of companies like BlackRock, which recently introduced similar strategies.

According to FXStreet, an investment media outlet, on July 7 (local time), Binance introduced 'BTC Yield,' a product exclusively for Bitcoin holders within Binance Earn. Users who deposit Bitcoin will receive 'BTCY,' an internal position representing their stake in the strategy. All operations are conducted in Bitcoin, and investments cannot be made with stablecoins or other assets.

Binance operates a covered call strategy that continuously sells Bitcoin call options using deposited Bitcoin as collateral. Most of the option premiums generated through this are distributed to investors. The covered call strategy has been widely used in traditional finance and cryptocurrency markets, but it required specialized knowledge of options. Binance explained that it designed the product to handle the complex operational process within the platform, making it easily accessible to general investors.

The product generates returns in two ways. First, a portion of the option premium can be converted into Bitcoin and paid to the user's spot account every Friday. The remaining premium continues to accrue within the strategy, gradually increasing the actual Bitcoin value represented by one unit of BTCY. When an investor redeems the product, they can receive additional profits corresponding to the increased amount of Bitcoin.

However, risk factors also exist. Binance takes 15% of the total option premium as a fee before calculating investor returns, and a separate fee is charged upon redemption. Furthermore, the principal is not guaranteed, and weekly distributions are not guaranteed and can be zero. The media also reported that if Bitcoin experiences a strong bull market, the sold call options may be exercised, limiting upside gains, potentially leading to lower performance than simply holding Bitcoin.

The media evaluated BTC Yield as a product that provides long-term holders with a simple way to pursue additional income from idle Bitcoin, but it is suitable for investors who fully understand the risks, such as the structure of the covered call strategy and its profit limitations.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*