Coin-margined contracts use cryptocurrencies as the settlement currency, instead of stablecoins as collateral. Each contract has a multiplier that reflects its value. For example, a BTC contract is worth $100 and an ETH contract is worth $10. Contracts have different expiration dates, including perpetual and quarterly contracts. The advantage of coin-margined contracts is that they use cryptocurrencies as the settlement currency, providing an ideal option for miners or holders. Since the contracts settle in cryptocurrencies, the profits can be used for long-term capital accumulation. Additionally, as the price continues to rise, the value of the collateral also increases, making coin-margined contracts an excellent way to increase cryptocurrency holdings.
When hedging positions in the contract market, there is no need to exchange the held assets into stablecoins. To implement hedging, just establish a short position in any exchange’s coin-margined quarterly contract. If the underlying asset’s price falls, the profit from the contract position can offset the losses in the portfolio. Moreover, coin-margined contracts avoid the possibility of forced liquidation. In this case, the counterparty automatically forces liquidation to fill the bankrupt trader’s position, potentially exposing the trader to the risk of automatic deleveraging.
USDⓈ-Margined contracts use assets that are pegged to the US dollar, including USDT, as the settlement currency. These contracts have different expiration dates, including perpetual and quarterly contracts. Each contract specifies the delivery quantity of a single underlying asset, also known as a “contract unit.” The biggest advantage of settling in USDT is the ease of calculating returns in fiat currency, making USDⓈ-Margined contracts more intuitive. Using a universal settlement currency significantly improves trading flexibility, as multiple futures contracts can use the same settlement currency without the need to purchase underlying tokens for margin. As a result, there are no additional currency exchange costs when trading with USDT.
In times of market volatility, USDⓈ-Margined contracts can effectively reduce the risk of large price fluctuations. Compared to coin-margined contracts, USDⓈ-Margined contracts can reduce the risk of significant price fluctuations in times of market turbulence. This is because USDⓈ-Margined contracts are priced and settled in USDT, which typically has a more stable value than cryptocurrencies. In the event of large price swings, the settlement currency of USDⓈ-Margined contracts can stabilize the contract value, reducing the risk for investors.
Additionally, the settlement currency of USDⓈ-Margined contracts makes trading more intuitive. For example, the value of one USDT is almost equivalent to one US dollar, which makes it easier for investors to calculate their profits or losses. During trading, USDⓈ-Margined contracts use a universal settlement currency (such as USDT) for pricing and settlement, which also increases trading flexibility. At the same time, multiple contracts can use the same settlement currency, and there is no need to purchase the underlying token as collateral for contract positions, saving some costs.
It should be noted that when going long, the profits of USDⓈ-Margined contracts are smaller than those of Coin-Margined contracts, but the risks are smaller. When going short, the profits of USDⓈ-Margined contracts are greater than those of Coin-Margined contracts, but the risks are greater.
In conclusion, USDⓈ-Margined contracts and Coin-Margined contracts each have their own advantages and characteristics. Investors can choose the contract type that suits them best based on their risk tolerance and investment goals.