BUSD Vs USDT
The Stablecoins’ Race
Dear Reader👐
☛I recently participated in a poll on Reddit that asked people to vote for the USD backed stablecoin they prefer for trading, between BUSD and USDT.
As you have seen, BUSD, the underdog, won the mini poll that only had 278 voters. This, in one way or another, goes to show just how fast BUSD has grown in the past few months.
To be honest, 🤔I was surprised that BUSD won. I mean, when USDT continues to account for most of the volume traded daily across all stablecoins, you’d expect people to treat the string of negative info around it as mere FUD. But clearly, they see it more than just FUD.
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✳Traders yearn for an alternative stablecoin for diversity
Just so we’re clear, USDT has had competitors since inception. These include the likes of USDC and PAX. But the alternative stablecoins have lagged behind and failed to compete on the scale that USDT plays. Perpetual swaps or the futures markets is one key segment where other older stablecoins have failed to gain traction.
BUSD could change that and in my opinion, it’s the reason why traders are excited. Binance, where a majority of these traders trade, has introduced BUSD-Margined contracts to compete against the long-standing USDT-margined counterpart. This is a gamechanger in the futures market.
For context, BUSD is regulated and audited. The stablecoin is regulated by the New York State Department of Financial Services. Minting is done by Paxos, the same guys behind PAX, and they ensure that every BUSD is backed 1:1 by a physical dollar stored in FDIC-insured US banks.
The thing is, a good number of traders no longer feel safe keeping their holdings in USDT. The fact that Tether is unregulated, besides being plagued by lawsuits and further failing to prove that its USDT minting machine is a hundred percent backed by hard dollars has only fanned the embers of fear.
☞To compete against USDT, you have to first address its shortcomings, and then introduce perp margined contracts backed by a new stablecoin on an exchange that accounts for the highest daily trading volume.
Voila, that’s what the team behind BUSD have done.
✳Why there’s alot of hype around BUSD
➡For starters, if you use Binance as your main exchange, there are zero fees using BUSD for limit orders.
This is an ongoing Zero Maker Fee promotion incentive for all BUSD pairs and the Zero transaction fee promotion for 4 BUSD stablecoin pairs. Users can purchase and trade BUSD with a low fee and enjoy the great liquidly in the Spot and Margin market.
For example, if you make a maker-trade on BTC/BUSD in the spot market, you will not incur fees. Additionally, if you trade a BUSD stablecoin pair such as BUSD/USDT, you can transact with no cost at all.
With such an offer, you should definitely be using BUSD if you’re trading regularly.
➡Next is the issue about trust. People hate mistrust especially when their money is involved and thankfully BUSD has steered clear of that so far. As earlier mentioned, this stablecoin is regulated and the value of each BUSD is tied directly to the value of the US dollar, and the amount of “reserve” dollars equal or exceed the number of stablecoins outstanding.
As a trader, you just want the assurance that your BUSD will be immediately available when you want them.
➡Another inviting aspect about BUSD is that it can be staked directly on Binance.
Additionally, you can trade BUSD perpetual futures alongside USDT counterparts. If you trade futures, you understand for a fact that this one is huge.
✳What are BUSD-margined contracts?
BUSD-margined contracts are a type of linear futures product quoted, collateralized, and settled in BUSD. In other words, you’d be required to deposit BUSD in your Binance Futures account in order to trade pairs such as BTCUSD or ETHUSD.
Follow this link to access the BUSD-margined contracts on Binance. This is an affiliate link. If you open the link to trade BUSD-margined contracts, you will get a discount and we may earn a commission.
If you’ve ever traded the USDT-margined contracts on Binance, the process is much the same, except the differences in the base currency. Check this guide on how to trade BUSD-margined contracts.
BUSD-margined perpetual contracts offer the following characteristics:
Contracts are denominated and settled in BUSD.
You can hold positions without an expiry date.
The conventional funding rate charges apply every eight hours.
Clear pricing rules in the trading pairs which are pegged to spot markets.
✳What will I gain by trading BUSD-margined contracts?
Low fees: If you use Binance, there are added benefits like cheaper trading fees and occasional fee discounts that apply to the trading pairs available in BUSD. The most recent discount window closed on September 7th.
Stability: Even though BUSD is much newer, it’s been stable and has been widely adopted and is now used by millions of users on Binance.
Versatility: Binance has engineered BUSD-margined contracts to be highly flexible. With the Multi-Assets Mode function, users can diversify across various stable coins and increase their capital efficiency. With this feature, users can share their margin across USD-margined products available on Binance Futures (USDT & BUSD); this is particularly useful when opening positions in the two markets.
Ever growing liquidity: Even though USDT-margined contracts trading pairs are the most liquid in the market to date, BUSD popularity has given it a fighting edge which is enough for traders who believe it could one day make a reasonable competitor in the stablecoin market.
✳Final thoughts
When it comes to stablecoins, most traders agree that diversity is key to ensure that markets remain safe and inviting for everyone.
Furthermore, from an average trader’s perspective, there is little difference between BUSD and USDT backed futures except that you’ll pay less fees with BUSD trading pairs.
☛Finally, having a much safer stablecoin to trade with is something we haven’t had for a long time and the timing is crucial as it provides a huge advantage, especially to those who trade crypto futures on Binance.
Disclaimer
This post is for informational purposes only and should not be taken as financial advice. Any purchase of financial products should be done at your own discretion.
Disclosure
We only recommend products we use ourself and all opinions expressed here are our own. This post contains affiliate links. If you use these links to buy crypto assets, you will get a discount and we may earn a commission. Thanks.