With our latest Crypto on Credit feature, users may now borrow capital and trade at higher volumes while taking advantage of our limited-time low interest rates.
Take a look at some of the use cases we’ve prepared below to learn more how to utilize this product to maximize your trading potential especially for P2P (Peer-to-Peer) merchants.
Hedging Overnight Unsold USDT/USDC Inventory for P2P Merchants
P2P merchants with unsold USDT or USDC overnight are exposed to price fluctuations between the stablecoin and the Philippine Peso (PHP). If the value of USDT/USDC drops against PHP, the merchant could incur losses - to mitigate this risk, merchants can use the Crypto on Credit feature to open a position that offsets potential losses.
By borrowing USDT/USDC and selling them for PHP, they can hedge their inventory. If the price of USDT/USDC falls, they can buy back the USDT at a lower price and sell them to offset their inventory loss with the profit gained.
Sample Scenario
- A P2P merchant has ₱500,000 worth of unsold USDT at the end of the day, expecting the USDT/PHP rate to drop overnight due to market volatility.
- To hedge, they can use Crypto on Credit to borrow ₱500,000 worth of additional USDT stocks that they can sell.
- If the USDT/PHP rate drops the next day, they can repurchase USDT at a lower price with PHP and pay back the USDT loan.
- The profit from selling the USDT stocks that were bought at a lower price can offset the drop in the market value of the merchant’s unsold USDT inventory, minimizing their overall risk.
Taking Directional Trades
If a trader anticipates that the value of USDT or USDC will increase relative to PHP, they can use Crypto on Credit to open a position and profit from the expected price movement. By borrowing PHP to purchase USDT/USDC, they can benefit from the appreciation of the stablecoin against PHP. This strategy allows traders to leverage their position without needing upfront capital.
Sample Scenarios
Market Rate Increase
- A trader believes that the USDT/PHP rate will rise due to increased demand for stablecoins in the market.
- They can use Crypto on Credit to borrow ₱100,000 and purchase USDT at the current rate of ₱56 per USDT.
- If the USDT/PHP rate increases to ₱58, the value of their USDT holdings rises to approximately ₱103,571.
- After repaying the borrowed PHP funds, the trader nets a profit from the price appraisal, allowing them to capitalize on their market prediction without needing to invest their own funds upfront.
Market Rate Decrease
- A trader believes that the USDT/PHP rate will decrease, so they used Crypto on Credit to borrow ₱10,000 PHP worth of USDT.
- The trader then immediately sells the borrowed USDT at the current rate.
- The trader then holds the PHP, while waiting for the USDT/PHP rate to drop.
- Once the rate decrease occurs as expected, they’ll buy back the sold USDT at a lower rate, generating extra profit from the rate drop using the borrowed assets.
Key Considerations
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Risk Management:
Both strategies involve market risks. For hedging, the goal is to minimize losses, while directional trades aim for profits. Traders should carefully assess market conditions and their risk tolerance.
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Repayment Terms:
Users must ensure they can repay the borrowed PHP within the agreed terms to avoid additional fees or automatic liquidation.
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Market Volatility:
Stablecoins such as USDT and USDC are generally less volatile than other cryptocurrencies, users must still be aware of this especially when trading using other assets supported under Crypto on Credit.