Qume is launching a BTC/USDC cryptocurrency option product that will allow users to earn enhanced yields based on their view of the price movement of Bitcoin and their risk appetite.
This income generation and wealth management product is for investors who want returns without attracting much risk to their portfolio. Qume’s DCPs will generate significantly higher yields compared to traditional DCPs due to the elevated implied volatility of digital assets.
In general, the greater the volatility, the higher the yield. Bitcoin’s implied volatility continues to hover at elevated levels.
Our short-term maturity dates give users the flexibility to invest their BTC from as little as approximately two days left to expiry. There are no hidden fees or charges and the DCPs are highly customizable and transparent in terms of the risks/returns associated with it.
Users generate positive yields in either USDC or BTC (explained below).
How does Qume’s DCP work?
Yield generation in three steps:
- Buy BTC @ spot price
- Choose a linked price. *
- Chose a maturity date for the product. *
*Based on your linked price and maturity date, Qume’s oracle will determine an ‘x’-day yield and annualized yield in BTC where ‘x’ is tenor of the contract.
To determine whether the proceeds of maturity will be paid to you in BTC or USDC, the linked price is compared against the settlement price at expiry. Qume will use USDC as a proxy to USD.
Payout example scenario:
Assuming the BTC/USD spot rate is at USD $9,250 and you invest USD $9,250, for a tenor of 11 days with the linked price of USD $10,000. Given Qume’s oracle determines the 11-day yield to be 2.20%.
CASE 1: BTC rallies against USD and settles above the linked price: Let’s say $12,000
In this case, you receive the payout in USDC.
Your Bitcoin is converted to USDC at the linked price of $10,000 and you receive the 11-day yield of 2.20% BTC in USDC.
= USD $10,000 + $203.5
=USD $10.203.5
=10.31% USD yield for 11 days
CASE 2: BTC settles below the linked price: Let’s say $8,000
In this case, you receive the payout in BTC.
You receive your original amount of BTC plus the 11-day yield of BTC in Bitcoin.
=1 BTC + 0.022 BTC
=1.022 BTC
=2.20% BTC yield for 11-days
In both cases, users receive an enhanced yield.
Risks:
We encourage investors to understand the product’s risk and measure it against their risk appetite.
The two scenarios explained above hold the following risks:
- In scenario one, you may miss out on gains if BTC makes a significant rally as the payout is in USDC.
- In scenario two, you have more Bitcoin, but their final value may be less than what you had invested initially. This means Qume’s BTC/USDC DCP is not principal protected.
- The risk associated with DCPs decreases with shorter maturity times. Generally, higher linked price products are more conservative with lower returns and lower linked products are riskier and compensated with higher returns.
Qume will offer a wide range of dual cryptocurrencies products in the future as we are committed to bringing innovative crypto-finance products for our users.
Trade on the world’s fastest crypto derivatives exchange — www.qume.io
