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Recently, many traders are asking about the benefits of Bitcoin-based quanto derivatives. MCS is the only one of few cryptocurrency derivatives exchanges that offer the Bitcoin-based quanto perpetual contracts in the industry. First, let's find out what a Bitcoin-based Quanto derivative is.
What is a Bitcoin (BTC) based quanto derivative?
Quanto refers to a derivative instrument that is settled as another asset rather than settled in either the base currency or the quote currency in the trading pair. So, MCS's ETH/USDT perpetual contract, a Bitcoin (BTC) quanto derivative, is settled in BTC by holding a margin in BTC rather than settling with either Ethereum (ETH) or Tether (USDT).
Benefits of Bitcoin (BTC) based quanto derivatives
The foremost benefit of Bitcoin (BTC) based quanto derivatives is that when you trade perpetual contracts of other cryptocurrencies such as Ethereum or Ripple: if the price of cryptocurrency rises, all the profits will be settled in Bitcoin (BTC). This means that if the price of Bitcoin (BTC) rises, this increase will also become your profit. Let me explain in more detail with the example below.
A magic that can make your assets 100 times when Ethereum goes up by 10 times
First of all, let us assume that the initial investment is 1 BTC, the current Bitcoin price is $24,000, and the Ethereum price is $640.
In the situation above, if you enter the long position of 1x leverage on the Ethereum perpetual contract with 1 BTC, you can have about 16,000 contracts. Here, assuming that the Ethereum price has increased 10 times to $6,400, the rate of return is as follows:
Long Position Profit and Loss Formula:
Contract Quantity * Multiplier * (Avg. Exit Price - Avg. Entry Price)
16,000 (Contract Quantity) X 0.0000001 BTC (Multiplier) * (6,400 (Exit Price)-640 (Entry Price)) = 9.216 BTC
According to the above calculation, when Ethereum increases by 10 times, the profit is 9.216 BTC, and when the initial investment of 1 BTC is added up, the total asset is 10.216 BTC. Now, you might wonder, how realistic is this?
When looking at charts of major cryptocurrency prices in the past, the fluctuations of Bitcoin and major cryptocurrencies are always moving similarly. While the price of Ethereum rises 10 times, it is very likely that the price of Bitcoin will also rise 10 times. Therefore, if the dollar value of 1 BTC in the beginning, which was $24,000, increase 10 times to $240,000, the dollar value of 10.216 BTC is now $2,451,840; you just made 100 times the return on capital!
Thus, in the case of Bitcoin-based quanto derivatives, not only the increase in the cryptocurrency price you invest in, but also the increase in the bitcoin price can be turned into your profit. In addition, while experts in various fields are predicting a rise in Bitcoin prices in the long run, it is time to pay more attention to the Bitcoin-based quanto derivatives that MCS offers.
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