In the digital currency market, derivative trading has become a crucial tool for investors to manage risks and implement profit strategies. For beginners, understanding different types of contracts is essential—particularly USD-margined (U本位) and coin-margined (币本位) contracts, the two most common derivative trading methods. This article explores their definitions, differences, and practical applications to help investors make informed decisions.
Part 1: What Is a Coin-Margined Contract?
A coin-margined contract uses the traded cryptocurrency (e.g., BTC, ETH) as collateral and for settlement. Here’s how it works:
How Coin-Margined Contracts Operate
- Collateral & Settlement: Traders hold the base cryptocurrency (e.g., BTC for BTC/USD contracts). Profits/losses are calculated in the same crypto.
- Example: If trading a BTC/USD coin-margined contract, your gains/losses adjust your BTC holdings directly.
Advantages
- High Leverage: Supports larger leverage (e.g., 50–100×) due to crypto volatility.
- Ideal for Crypto Holders: Profits compound if the collateral crypto appreciates.
- Flexible Hedging: Aligns with long-term crypto investment strategies.
Risks
- High Volatility: Crypto price swings magnify gains/losses.
- Leverage Dangers: Overexposure can trigger rapid liquidation.
Part 2: What Is a USD-Margined Contract?
A USD-margined contract uses USDT (or another stablecoin) for collateral and settlement, reducing crypto volatility risks.
How USD-Margined Contracts Operate
- Collateral & Settlement: All positions are margined and settled in USDT, regardless of the traded asset (e.g., BTC or ETH).
- Example: Earning 500 USDT on a BTC trade remains 500 USDT, unaffected by BTC’s price changes.
Advantages
- Stability: USDT’s peg to USD minimizes volatility.
- Lower Risk: Predictable profit/loss calculations.
- Conservative Trading: Suitable for risk-averse traders.
Risks
- Lower Leverage: Typically capped at 20–50×.
- Stablecoin Risks: Rare depegging events may impact USDT value.
Part 3: Key Differences Between Coin-Margined and USD-Margined Contracts
| Aspect | Coin-Margined | USD-Margined |
|---|---|---|
| Collateral | Cryptocurrency (e.g., BTC) | USDT |
| Volatility Exposure | High (direct crypto exposure) | Low (stablecoin-backed) |
| Leverage Range | 50–100× | 20–50× |
| Best For | Aggressive traders, crypto holders | Risk-averse, stablecoin-focused traders |
Part 4: How to Choose the Right Contract?
Coin-Margined: Opt for this if you:
- Hold long-term crypto positions.
- Tolerate high volatility for potential higher returns.
USD-Margined: Choose this if you:
- Prefer stable profits.
- Want to avoid crypto price fluctuations.
👉 Discover advanced trading strategies to optimize your contract selection.
Part 5: FAQs
Q1: Can I switch between contract types mid-trade?
A: No—positions must be closed and reopened in the desired contract type.
Q2: Which contract offers better tax benefits?
A: Coin-margined may defer taxable events (depending on jurisdiction), while USD-margined provides clearer fiat accounting.
Q3: How do funding rates differ?
A: Rates are similar but calculated in the respective collateral currency (BTC vs. USDT).
👉 Learn more about minimizing funding costs.
Conclusion
Coin-margined and USD-margined contracts cater to divergent trading styles. Assess your risk appetite, market outlook, and collateral preferences before choosing. Always practice risk management—regardless of contract type.