Introduction

In the rapidly evolving cryptocurrency field, financial innovations continue to emerge, providing investors with a diverse array of tools and opportunities. The BIT Exchange, in collaboration with VETA Finance, has recently launched an innovative product—Square Options—that allows users to trade structured products in a spot trading manner, greatly simplifying the trading process and offering users an unprecedented convenient experience. This innovative move not only provides investors with opportunities for high-leverage returns but also further promotes the development of the cryptocurrency financial market.

I. Financial Innovations in the Cryptocurrency Field

In recent years, the cryptocurrency market has experienced explosive growth. With the popularity of mainstream cryptocurrencies like Bitcoin and Ethereum, the demand for new financial products is continuously increasing. Investors are looking for more efficient and convenient ways to participate in the market and achieve higher returns. Against this backdrop, major exchanges and fintech companies have launched various innovative products in an attempt to meet investors' needs.

As a leading cryptocurrency trading platform, BIT Exchange has always been committed to providing users with cutting-edge trading tools and products. In addition to derivatives such as contracts and options similar to those in traditional finance, as well as structured financial products like dual-currency wealth management and shark fin products, the Square Options launched in collaboration with VETA Finance is the latest attempt under this concept and a tangible manifestation of financial innovation in the cryptocurrency field.

II. What are Square Options?

Square Options are financial instruments designed as spot tokens, allowing investors to gain exponential returns by investing in the price movements of Bitcoin or Ethereum when the market moves in the direction of their investment.

Specifically, the Square Options on BIT are divided into four types:

• BTC²UP: Generates exponential returns when the price of Bitcoin rises
• BTC²DOWN: Generates exponential returns when the price of Bitcoin falls
• ETH²UP: Generates exponential returns when the price of Ethereum rises
• ETH²DOWN: Generates exponential returns when the price of Ethereum falls

Through this design, investors can choose the corresponding Square Options products based on their market trend judgments to maximize returns under different market conditions.

III. The Operating Mechanism of Square Options

The operating mechanism of Square Options is relatively simple, aiming to provide users with a convenient trading experience. Users can easily purchase Square Options on the BIT Spot Plus market, just like buying spot cryptocurrencies. This design significantly reduces the complexity of trading, making it easy for users without extensive investment experience to get started.

Square Options tokens are packaged as European options. Holders can exercise their options on the expiration date or trade them before expiration. Similar to conventional European options, Square Options are primarily influenced by factors such as the underlying asset price, volatility, and expiration time.

1. Non-linear Return Structure

   Square Options adopt a non-linear return structure, meaning that when the underlying asset price changes, the returns of the options do not simply increase linearly but grow exponentially. This characteristic allows investors' returns to be rapidly amplified when market conditions are favorable.

2. No Liquidation Risk

   Compared to traditional high-leverage trading, Square Options have no liquidation risk. Investors do not need to worry about forced liquidation due to market fluctuations, allowing for more peace of mind in their investments.

3. Easy Trading

   The trading process for Square Options is very straightforward; users only need to select a call or put option product on the BIT Exchange and then purchase based on their judgment. The entire process is similar to buying spot cryptocurrencies, significantly lowering the trading threshold.

4. Monthly Expiration Mechanism

   Square Options are monthly tokens, with expiration dates set for the last Friday of each month, aligning with the trading hours of the BIT options market. This design allows investors to better plan and manage their investment strategies.

IV. Calculation of Expiration Returns for Square Options Tokens

Expiration returns for Square Options (per token):

Where

CT: The expiration USDT return for each call Square Option

ST: The delivery price of the underlying asset, which is the average index price of the underlying asset 30 minutes before the expiration of the option token

K: The strike price of the Square Option

PT: The expiration USDT return for each put Square Option

Please note the number of Square Options corresponding to each token, for example, BTCUP represents 0.01 of a BTC call Square Option.

Comparison of expiration returns for ordinary vanilla options:

From the above formula, it can be seen that due to the different calculation methods for returns between Square Options and ordinary vanilla options, when the market experiences a significant rise, the returns from call Square Options will be significantly greater than those from ordinary call options, and vice versa.

Comparison Chart of Expiration Returns for Square Options and Ordinary Options

V. Practical Case Analysis

On May 21, the Bitcoin (BTC) and Ethereum (ETH) markets suddenly experienced a significant rise. BTC broke through $70,000, with a 6% increase; ETH surged by 14.5%, reaching $3,518. This was mainly attributed to investor enthusiasm for spot ETFs and a broad market rebound.

Case 1: Short-term High Returns

Assuming you purchased a call Square Option for ETH with a strike price of $4,100, expiring on May 31, at the latest price of $17.08, with a 24-hour increase of 972.25%. If an investor bought this option last night for $1.58, they could sell it today for $17.08, yielding nearly a 10-fold return. This case demonstrates the potential for high returns from Square Options in the short term.

Case 2: Long-term Exponential Growth

Assuming you purchased a call Square Option for ETH with a strike price of $3,400, expiring on June 28, at the latest price of $135.81, with a 24-hour increase of 300.33%. This option has already surpassed the strike price, meaning that every time the ETH price rises further, the returns will grow exponentially. This case illustrates the exponential growth potential of Square Options in long-term investments.

Return Chart for BIT Spot Plus Square Options Tokens on May 21

VI. Comparison of Square Options with Other Financial Products

1. Perpetual Contracts

   While perpetual contracts offer high leverage, they are prone to liquidation during high volatility; Square Options have no liquidation risk, making them more suitable for investors seeking stable returns.

2. Alternative Tokens

   Other alternative tokens may offer high returns but come with extremely high risks and are susceptible to market manipulation; Square Options provide a more stable and reliable path to high returns.

3. Traditional Options

   Traditional options are complex and require a high level of expertise; Square Options are designed to be simple, making them suitable for a broader range of investors. This characteristic gives Square Options a higher acceptance among a wide investor base.

VII. BIT Square Options Purchase Guide

Purchasing Square Options on BIT is also very simple and straightforward. Click the "Market" button on the BIT App homepage, select "Spot Plus," and you can choose the currency, direction, and expiration date, then enter the price and quantity to make a purchase.

Note: Square Options are only supported on the BIT App; please click the BIT App download link to purchase.

About BIT

BIT (BIT.com) is a comprehensive cryptocurrency exchange designed for professional trading users, supporting advanced risk management and enhancing capital efficiency through its portfolio margin and unified margin features. BIT was established in August 2020 and is a sibling company of the well-known crypto financial services company Matrixport.

About VETA Finance

VETA Finance is the world's first on-chain platform supporting margin trading of structured products, covering the entire service chain of decentralized financial platforms, including structured product pricing and operations for exchanges and other platforms.