BUSD is a US dollar-pegged stablecoin issued by the Binance cryptocurrency exchange in a 1:1 ratio. This article explains what BUSD is, the available contract products, its security features, and the benefits of using it on Binance.
What is BUSD? How Does It Differ from USDT?
BUSD is a stablecoin pegged 1:1 to the US dollar, issued through a collaboration between Binance and Paxos, a regulated blockchain infrastructure company.
Paxos is a chartered trust company regulated by the New York Department of Financial Services (NYDFS), which permits it to issue stablecoins legally. This regulatory backing has made Paxos a trusted partner for major exchanges like Binance and Huobi in launching their stablecoins (BUSD and HUSD). Notably, PayPal also partnered with Paxos to offer cryptocurrency services.
Stablecoins are digital assets tied to the value of fiat currencies. For every BUSD issued, Binance holds one US dollar (or an equivalent asset) in reserve, ensuring the exchange rate remains stable at 1:1.
In the crypto world, the most well-known and largest stablecoin by market capitalization is USDT (Tether), which ranks just behind Bitcoin and Ethereum.
While both USDT and BUSD are dollar-pegged stablecoins, using BUSD on Binance offers distinct advantages:
- Supports ERC20 and BEP20 protocols, making it easy to store in wallets compatible with ERC20 or the Binance decentralized exchange (DEX).
- Users enjoy trading discounts when using BUSD on Binance (details below).
By July 2021, BUSD's market capitalization had reached one billion dollars, ranking it tenth in the entire crypto market and third among stablecoins. This makes BUSD one of the most recognized and representative stablecoins available.
Now that we understand what BUSD is, let's explore BUSD margin contracts.
Understanding Leverage and Margin
The mechanics of cryptocurrency contract trading are similar to futures trading, with the key difference being the availability of perpetual contracts (which have no settlement date and allow for higher leverage). Both require margin payments.
Leverage is a feature in derivatives trading—like futures, forex margin, and contracts for difference (CFDs)—that allows you to control a large position with a relatively small amount of capital. The funds you deposit are known as "margin," which acts as collateral to cover potential losses for the counterparty.
For example, if you open a position with 3x leverage, you can抵押 1 BUSD to control a position worth 3 BUSD. The additional 2 BUSD is essentially borrowed from Binance, for which you must pay a daily interest fee (approximately 0.05%).
A BUSD margin contract simply means that BUSD is used as the margin currency. While Binance contracts have traditionally used USDT as margin, BUSD margin contracts use BUSD instead.
In margin trading, two types of margin are typically discussed:
- Initial Margin: The minimum amount of margin a user must deposit to open a position.
- Maintenance Margin: If the market moves against your position, your losses will reduce your margin balance. If this balance falls below the maintenance margin requirement, the system will automatically liquidate your position to prevent further losses.
What BUSD Margin Contracts Are Available on Binance?
Contracts on Binance can be divided into two types: Perpetual Contracts and Delivery Contracts.
The key difference is that perpetual contracts have no expiry date, allowing you to hold a position indefinitely. Delivery contracts, like traditional futures, have a set expiry date upon which the position is automatically closed and settled in cash (no physical delivery involved).
Currently, Binance only offers perpetual contracts for BUSD, while USDT contracts are available for both perpetual and delivery types. However, users can utilize the Multi-Assets Mode to share margin between BUSD and USDT contracts.
This means you can directly use BUSD as margin for USDT contracts (and vice versa), eliminating the need for currency conversion and allowing profits and losses from different contracts to offset each other, thus reducing the risk of liquidation.
For a detailed guide on Multi-Assets Mode, see our tutorial on how to enable and use this feature.
The following table compares the key differences between Futures, Perpetual Contracts, and Delivery Contracts:
| Feature | Futures | Perpetual Contracts | Delivery Contracts |
|---|---|---|---|
| Expiry Date | Yes | No | Yes |
| Funding Rate | No | Yes | No |
| Settlement | Physical | Cash | Cash |
| Leverage Available | Yes | Yes | Yes |
You can find BUSD perpetual contracts by navigating to the "U-based Contracts" section on the left side of the Binance Futures homepage.
Once inside the BUSD contract interface, you can search for "BUSD" in the search bar to find all available trading pairs.
Currently, BUSD supports trading pairs like BTC/BUSD, BNB/BUSD, ADA/BUSD, ETH/BUSD, and XRP/BUSD. More BUSD-based contract pairs are expected to be added in the future.
A quick note: When searching for "BUSD," you might see results like BN"BUSD" or TR"BUSD"T, which are not actual BUSD contracts. Always double-check the contract name before trading.
Advantages of Using BUSD Margin Contracts on Binance
Regulatory Oversight and Security
The biggest concern with any stablecoin is the issuer's credibility. If the reserve holdings do not match the number of tokens in circulation, it can lead to doubts, user abandonment, and even a collapse in the token's value (triggering a sell-off).
For instance, if a company issues $1 billion worth of a dollar-pegged stablecoin but only holds $800 million in reserves, the stablecoin's value would drop to $0.80, breaking the 1:1 peg and eroding investor trust.
As mentioned, BUSD is issued in partnership with Paxos, which is strictly regulated by the NYDFS. This ensures that BUSD is fully backed 100% by real, equivalent assets (like cash and cash equivalents).
Furthermore, Paxos regularly publishes audit reports to provide transparency, so users can be confident in its security and avoid credit risk concerns.
Trading Discounts on Binance
Since BUSD is Binance's native stablecoin, using it on the platform comes with special benefits.
For example, buying BUSD directly on Binance or converting other stablecoins to BUSD incurs zero trading fees (supported pairs include BUSD/USDT, USDC/BUSD, TUSD/BUSD, and PAX/BUSD).
Additionally, trading fees for BUSD pairs are generally cheaper. Currently, the maker fee for most BUSD perpetual contracts is 0%. This promotion was initially set to last until December 31, 2021, but please check the latest announcements on Binance for current rates. Note that this fee discount does not apply to the BTC/BUSD perpetual contract or any new BUSD contracts added in the future.
For withdrawal needs, the fee for transferring BUSD via the Binance Smart Chain (BEP20 network) is also zero. Learn more about the Binance Smart Chain in our dedicated guide.
👉 Explore efficient withdrawal networks
Can Be Used as Margin for USDT Contracts
As highlighted earlier, Binance's Multi-Assets Mode allows users to employ BUSD as margin for USDT contracts.
This means funds between USDT and BUSD contracts are shared. You won't need to sell assets from a USDT contract to free up funds for a BUSD position, and vice versa.
This shared pool saves on currency conversion costs and allows profits from one contract to cover potential losses in another, reducing overall liquidation risk and providing greater flexibility in fund management.
Binance BUSD Contract Trading Demo and Basic Strategy
For detailed contract trading strategies, we recommend reviewing our previous articles on technical analysis indicators.
- How to Use MACD to Predict Crypto Trends on Binance
- Swing Trading Strategies and Techniques
- Using Bollinger Bands to Identify Support and Resistance Levels
Let's use a simple moving average crossover strategy to demonstrate a long (buy) position on a BTC/BUSD perpetual contract.
The strategy involves two moving averages: one short-term and one long-term. A "golden cross," where the short-term average crosses above the long-term average, is often considered a bullish signal indicating potential upward price momentum.
In this example, we use a 7-day moving average (yellow) and a 25-day moving average (purple).
Reviewing the recent weeks of BTC price action, the circled areas show instances where the 7-day MA crossed above the 25-day MA, accompanied by increased trading volume. This convergence suggests a stronger potential for continued price appreciation, making it a potential entry point for a long position.
At the time of writing (August 10), the 25-day MA was also approaching a crossover above the 99-day MA (magenta). However, since the 99-day MA was still in a downward trend, the buy signal was not strongly confirmed, suggesting only modest potential price gains.
Once you identify a potential bullish signal, you can execute a trade in the trading interface on the right.
- Set Position Mode and Leverage: For this example, we use Cross Margin mode with 20x leverage. Leverage can be adjusted from 1x to 50x.
- Select Price Type: A market order is used here, meaning the order will be filled at the current best available market price.
- Input Amount: The amount can be adjusted using the slider below. 0% is on the left, 100% on the right. Sliding to the middle means using 50% of available funds for this trade.
- Confirm Details: The interface shows that this trade requires a margin of 10.58 BUSD to buy 0.009 BTC.
- Click "Buy/Long" to execute the order and open the position.
After the trade is executed, you can view the position's profit and loss (P&L) information at the bottom of the trading interface.
To close the position, simply click the "Close Position" button on the right.
You can review the overall P&L and other details for all your contracts in the U-based Contract Wallet section.
Frequently Asked Questions (FAQ)
Q: Is BUSD safe to use?
A: Yes, BUSD is considered highly secure. It is issued in partnership with Paxos, a company regulated by the New York Department of Financial Services (NYDFS). This ensures that every BUSD in circulation is fully backed 1:1 by US dollar reserves held in insured banks. Regular third-party audits confirm this backing.
Q: What are the main benefits of using BUSD over USDT on Binance?
A: The primary benefits include potential trading fee discounts (like 0% maker fees on certain pairs), zero fees for converting between major stablecoins and BUSD, and the ability to use BUSD as margin for USDT contracts through the Multi-Assets mode, enhancing capital efficiency.
Q: Can I withdraw BUSD to an external wallet?
A: Absolutely. BUSD supports the common ERC-20 (Ethereum) and BEP-20 (Binance Smart Chain) token standards. You can withdraw it to any compatible wallet. Notably, withdrawals via the BEP-20 network often have zero withdrawal fees on Binance.
Q: What is the difference between a perpetual contract and a delivery contract?
A: A perpetual contract has no expiry date, allowing you to hold a position indefinitely as long as you meet margin requirements. A delivery contract has a fixed expiration date, upon which the position is automatically settled in cash at the settlement price.
Q: What is Multi-Assets Mode?
A: This is a feature on Binance Futures that allows different assets (like USDT and BUSD) in your futures wallet to be combined and used as margin for various contracts. It increases flexibility and helps manage risk across different positions.
Q: Are there any risks involved in trading BUSD margin contracts?
A: Yes, the risks are inherent to leveraged derivatives trading. These include market risk (prices moving against you), liquidation risk (losing your margin if the market moves significantly), and leverage risk (amplified gains and losses). Always understand these risks before trading.
Conclusion
To summarize the key advantages of BUSD:
- BUSD is 100% backed by cash reserves and is regulated by US authorities, ensuring high security.
- As Binance's native stablecoin, BUSD offers various trading and withdrawal discounts on the platform.
- BUSD supports the Binance Smart Chain (BEP20) for fast and cheap transactions.
- BUSD can be used as joint margin for USDT contracts via the Multi-Assets Mode, improving capital utility.
For traders who frequently engage in contract trading, fees are a constant consideration. The low transaction fees associated with BUSD make it an excellent choice for high-volume traders.
For users already trading USDT contracts, the Multi-Assets Mode allows you to integrate BUSD, creating a shared margin pool that reduces liquidation risk and increases overall capital flexibility.
👉 Discover advanced margin trading features
This article is for informational purposes only and is not intended as investment advice, a recommendation, or a solicitation to open an account. Cryptocurrency investments carry extremely high risk. Please conduct your own research and be aware of the risks before participating.