Adaora Anders
4 min readAug 26, 2021

What Is BUSD: What Are BUSD-Margined Contracts?

BUSD! You must have heard it — I know I have. But it’s not just a buzzword. BUSD is a stable coin, just like Tether’s USDT.

The Binance USD (BUSD) derives its value from the United States dollar. And it’s not in mere words but cash held in US banks insured by the FDIC. The stability of the BUSD isn’t just fixed to the dollar, it has equivalent USD in banks to back it up; the rate of $1 to $1BUSD applies.

The stable coin has the backing of relevant US government agencies, like the New York States Department of Financial Services. So it’s not some financial product without any stamp of authority. The stability and flexibility of the BUSD make it a preferred choice in the crypto space for trades, asset accumulation, and much more. Of course, it’s a stable coin, so you shouldn’t expect value appreciation holding the BUSD.

Understanding BUSD-Margined Futures Contracts

Binance continues to dominate the futures trading space with revolutionary products. One of such novel additions is the BUSD-Margined Futures Contracts.

In a BUSD-Margined contract, you open positions on specific Perpetual contracts using the BUSD. Without having some BUSD, you can’t open margin positions. Frankly, everything you do on a BUSD-Margined contract demands having the stable coin (BUSD).

Whether you’re looking to add margin to a position, manage your profit/loss or close an open position, or settle margin maintenance fees in a BUSD-Margined contract, the BUSD is at the center of it all.

The BUSD-margined contract is similar to its USDT counterpart in all ramifications, including ease of use, available trades, etc. So if you have some knowledge of the USDT-margined contract, then you’re just about ready to delve into the virtual world of the BUSD-Margined contract.

Types Of BUSD-Margined Contracts

BUSD-margined contracts are available for different assets including BTC, DOGE, BNB, and more. The margin contract can be opened on different modes including the isolated and cross variants. Each margin mode has distinct features peculiar to it.

The Isolated Margin Mode

This entails opening a BUSD-margined contract in isolation. Once your BUSD margin is used to open a position in isolated margin mode, you can’t take it out unless you decide to close the trade. Adding or removing margin after opening a margin contract is dependent on the status of the position and available BUSD margin in your Futures account.

The preference for Isolated Margin Mode is common due to its stand-alone nature. Once opened, you need not worry about the BUSD in your Futures account being used to keep your margin contract opened.

Should you open a BUSD-margined contract in isolated margin mode on specific leverage, it can’t be changed afterward. As long as that isolated margin trade is open, any additional BUSD-margined contracts created must use the same leverage size. BUSD-margined contracts can also be opened in Cross Margin Mode. Here, the entire BUSD in your Futures account is used to fuel open positions. The fuse of the Cross Margin Mode is that an open position going bad can ruin the party for the others.

Yet, it gets worse once all the positions are looking bad. Of course, it all depends on your equity size. The more BUSD you have in your Futures account, the lower the possibility of your position being liquidated.

Though the Cross Margin Mode keeps all open positions active, this applies only to BUSD-margined perpetual contracts. So if you’re planning to open Coin-margined positions or USDT-margined contracts, this won’t work.

Attributes Of BUSD-Margine Contracts

Regardless of the mode or type of BUSD-margined contract, certain attributes are commonplace. Below are some of these attributes:

  • Never expires

Regular futures contracts might have expiry dates, but not BUSD-margined contracts. Positions can be left open for as long as you want. The only clause is to have sufficient margin to keep the trade active.

  • Transparent pricing stipulations

The BUSD-margined contract is quite unique in how contracts and asset quantity obtainable are precisely stated. There’s no need to second guess the size of a contract you’d get for some BUSD.

  • Profit/Loss Or Position Management

All margin positions are settled in BUSD. Whether you’re trying to close a position, take profit or manage your losses, BUSD is the currency for all transactions in a BUSD-Margined contract.

  • Funding Rate A Norm

BUSD-margined perpetual contract market prices aren’t so far behind their spot counterpart. Funding rates make this possible. These are made at an interval of 8 hours, depending on the side dominating — longs or shorts. The spot market prices are utilized to make such payments.

Closing Remarks

BUSD joins the foray in spicing up the global crypto ecosystem. Through BUSD-margined contracts, you can take advantage of all the perpetual futures contracts that interest you without limiting your portfolio to a single stable coin. Just as it’s often a great idea to diversify your portfolio, an even spread of stable coins is also advised. BUSD-margined contracts might have their appeals, but like any derivatives trading, it’s highly risky.

Caution is advised when trading cryptocurrencies, but margin/futures trading takes the cake. So tread carefully and manage your risks accordingly.

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