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Surging 18.95% in 24 Hours, are Bibox token bonds the future or just the flashes in the pan?

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On January 3, 2019, an AI-enhanced encrypted digital asset exchange, Bibox, opened its token bonds trading section – Bibox Bond [denoted by “BIX1901”]. Each contract’s price has gone up to 185 USD. The price has increased 18.95%, compared to its issue price. Bibox will release the other nine rounds of BIX Bond, according to its official statement. There are few products with more than 10% yields in this “crypto winter”.
The price of Bibox Bond keeps going up, though the market remains bearish. It proves two facts: first, token bond is in demand in the market; second, BIX1901 issued by Vocean is recognized and accepted by buyers. So what are the reasons behind this risen price?
Reasons behind the surge in price
Bibox’s token bonds opened to primary market participants on November 22, 2108, which was sold out within 12 hours. The buyers are mostly qualified institutional investors, cited an insider. This time, however, normal investors are able to access BIX1901 after completing KYC verification. The fundamental reason for BIX1901 price surge is that the supply is less than the demand, namely, the demand for BIX 1901 surpasses its circulation. So why is BIX1901 so popular in the market? This shall be explained from two aspects: product and market.
Bibox Bond is a token bond contract denominated in Bibox token [BIX]. There were total 4030 bond units issued in the first round, each with a face value of 1000 BIX. The Bibox Bonds are priced in GUSD. The coupon payment is fixed to be 48 BIX, and the mature period of each unit will be 6 months. Let’ take BIX1901 as an example. The face value of each BIX1901 equals to 1000BIX. If we calculate the issue price on January 2, the price of BIX1901 is around 150GUSD. Upon the maturity, if the BIX price drops, buyers can get 150GUSD [in the equivalent value of BIX] and coupon payment of 48BIX; if the BIX price goes up, buyers can get 1000BIX [principle] + 48BIX [coupon payment].

As we can see on the above poster, buying BIX1901 is similar to buying a free six-month call option. The value of BIX1901 shall be its face value plus BIX call option, which means buyers can get convertible bonds in bearish market. When the market turns bright, buyers will profit from it.
From the perspective of buyers, buying BIX190 brings stable earnings for them. Those holding Bibox Bond [BIX1901] are able to enjoy BIX incentive dividends as they normally do in BIX trading. According to Aries Wang, the co-founder of Bibox, they’ve done quite a lot of researches, and they found that the demand for low-risk products is growing gradually in bearish market. Institutional investors with the needs of assets allocation and risk hedging are increasing gradually, which lowers the average market risks.
From the perspective of market, the scale of the traditional bond market is nearly tens of billions, way higher than traditional stock market. Let’s take a look at the crypto industry before BIX1901, there was no real token bond and fixed income instrument ever existing. BIX1901 not only brings a new investment channel but also perfects the market structure for cryptocurrency. For professional institutional investors, BIX1901 provides a basic instrument to offset risk and allocate their assets.
From the perspective of project owners, token bond satisfied their diversified financing needs. Vocean, as a token bond issuing institution, will disclose project owners’ information, such as their operation performances, etc., and establishes credit rating, bringing a transparent mechanism to bond trading.
How to control the risk?
Risk control is inevitable no matter in traditional financial market or in crypto space. Particularly for companies in early development stage, when their management systems are not mature enough, how to manage risks appears to be of great importance. Besides, the essence of investment is that buyers feel great confidence on the product. The confidence, however, comes from whether the product is safe or not. BIX1901 is of no exception in this regard.
In terms of risk control, not only does Vocean execute strict risk control process, the issuing body – Bibox Limited also builds a thorough system(including double collaterals, dynamic collaterals and default deposit system) to guarantee the principle and interest shall be paid to buyers upon maturity.
First, it’s double collaterals. The number of bond contracts Bibox Limited totally issued was 4030, the equivalent of 4.03 million BIX, which means Bibox Limited has to pledge 8.06 million BIX. Paying double collateral fully shows that the Bibox Limited is capable of repaying.
Second is dynamic collateral management. When the collateral ratio is lower than 150%, that is around 6 million BIX, Vocean will issue margin call to demand additional collaterals; if Bibox Limited fails to do so, and the collateral drops down to 125%, that is around 5 million BIX, Vocean will distribute all the existing collateral to bond buyers.
Lastly, it’s default deposit system, Bibox Limited also deposits 1% of total principal value to Vocean. The deposit shall be paid in GUSD. In case of default resulted from Bibox Limited, Vocean will pay 10% of bond principle value [at most 20% of insurance pool] to those holding BIX1901.
When it comes to financing, token bonds show an obvious advantage in this regard. It is more transparent as it discloses more information, which is also a good investment sign for crypto enthusiasts. Products like token bonds are able to attract funds to advantaged enterprises, which is good for optimizing the allocation of market resources. For instance, projects with good benefits, like token bonds, are well received by investors compared to those with bad benefits, so is the same with its issuing cost, which will be relatively lower for projects with good benefits, and vice versa.
Once the token bonds market system grows mature, bonds trading will be driven by the market. Those issuing token bonds will be kicked out by buyers if they don’t honor the agreement. A mature and united token bonds market, so to speak, forms the base for crypto market. Those who firstly test their lucks on this industry are bound to have the “first-mover advantage”. Whatever direction the token bonds market goes, as the first exchange around the globe issuing the token bonds, Bibox is expected a faithful future.
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Biraajmaan covers market trends of major cryptocurrencies. As a graduate in engineering, his interests lie in Blockchain technology. With over a year as a journalist, his articles focus on US and UK markets.
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