Why Matrixport’s Buy-Below-Market could be the missing link in your BTC investment strategy
Buy-Below-Market, our latest structured product, allows you to acquire bitcoin at your desired price while reducing the risks associated with traditional trading tools like limit orders.
What is Buy-Below-Market and who is it for?
Everyone loves a discount, and none more so than a value investor on the hunt for underpriced, quality assets.
Matrixport’s Buy-Below-Market (BBM) has been created for just that purpose: to help investors buy bitcoin at lower-than-market rates.
One trading tool that many value investors commonly use to achieve these goals is buy limit orders. Buy limit orders are asset purchase orders that will only be executed if the price of an asset falls below the maximum price investors are willing to pay.
However, one common complaint of buy limit orders is that orders may not be executed if assets do not reach the specified price. Another common pain point is when an asset’s price falls even lower than buy limits, causing investors to miss out on opportunities for greater discounts.
With our one-day BBM option, the chances of you being able to buy BTC below market rates are higher than if you used buy limit orders, even if the asset’s price does not drop to your expected level.
That’s because the product has been structured in such a way that you will still have opportunities to buy BTC as long as the spot price falls within a predetermined range, as against an exact level as required by limit orders. And this range is pretty huge, we reckon.
So, how exactly do I use Buy-Below-Market to get a BTC discount?
It’s really quite simple.
Let’s say bitcoin is currently trading at US$48,323.35. You assess the market situation and would like to buy-in at US$48,000. You also believe that the price will not hold at this level for long.
You select the first option under BBM on the Matrixport app that shows ‘Buy Price’ for BTC at US$48,000. This works out to be a discount of 0.66% for the shortest tenor of one day.
(Note: If you are using BBM as an alternative to buy limit orders, a one-day lock-in period would make the most sense.)
As you will see in the image below, the longer the selected tenor, the greater the discount rate will be. There are reasons for this, but we will spare you the details. All you really need to know is that the greater your risk (a longer tenor, in this case), the greater your reward.
On the next screen, you will see that this option comes with a price range ‘condition’ of between US$48,000 (this is your desired Buy Price, or Strike Price as is more commonly known) and US$51,000 (this is also known as the ‘Knock Out’ level).
This condition denotes that if BTC price settles anywhere within this price range (US$48,000 to US$51,000) at the end of the one-day tenor, you will qualify to buy BTC at your desired Buy Price of US$48,000.
When this happens, 50% of your initial USDC fund will be used to buy BTC, with the remaining 50% of USDC returned to you as well.
Assuming you put in a ‘Buy Amount’ of 48,000 USDC (see illustration below), you will then receive 0.50 BTC and 24,000 USDC at settlement.
This is the best case scenario of the three possible outcomes. This is because you not only get to buy BTC at your desired discount, but you also get to keep half of your USDC funds. Think of it as having your cake and eating it too.
Why is that so? Unlike the aforementioned limit orders, the range provided by BBM means that you have a wider margin for error, versus an overly aggressive buy limit order with slim odds of being triggered.
Getting to keep half of your initial funds also means that if prices fall even lower than your desired Buy Price, you will get to use the unused funds to participate in another round of BBM and potentially buy BTC at an even lower price. This thus directly addresses another pain point of people who use buy limit orders - when prices fall even lower than their buy limits.
What are the other outcomes?
Now let’s consider the other two possible scenarios.
If BTC’s price settles at or below US$48,000 at the end of the one-day tenor:
100% of the user’s USDC fund will then be used to purchase BTC at their desired price of US$48,000.
This is the next best outcome for the user, as they would still receive 1 BTC at a price below market.
If BTC’s spot price rises above the Knock Out level of US$51,000:
In this scenario, the user’s funds are returned to them entirely and they lose out on buying BTC at their desired Buy Price.