Coin-margined Perpetual Contract Introduction
# Coin-margined Perpetual Contract Introduction
Coin-margined perpetual contracts are derivative products that use the underlying cryptocurrency (such as BTC, ETH) as both the collateral and settlement currency. Unlike USDT-margined contracts, profits and losses in coin-margined contracts are calculated and settled in the underlying cryptocurrency itself.
# Key Features of Coin-margined Contracts
# Margin Currency
Coin-margined contracts use the underlying cryptocurrency as the margin. For example, BTC/USD contracts require users to deposit BTC as collateral. This feature is particularly beneficial for users who already hold the specific cryptocurrency and want to leverage their position without converting to stablecoins.
# Pricing Unit
Coin-margined contracts are priced in USD, not USDT. This means the index price calculation differs from USDT-margined contracts. For example, the BTC/USD contract's index price is derived from the USD price of BTC across various spot exchanges.
# Contract Value
Each coin-margined contract represents a fixed USD value. For instance, one BTC/USD contract might have a value of $100. This means if BTC is priced at $50,000, one contract equals approximately 0.002 BTC ($100/$50,000).
# Profit and Loss Currency
One of the most significant differences between coin-margined and USDT-margined contracts is that profits and losses in coin-margined contracts are denominated in the underlying cryptocurrency. For example, when trading BTC/USD contracts, profits and losses are calculated in BTC.
This characteristic provides unique advantages in different market conditions:
- In a bull market, long positions gain in USD value but receive fewer BTC in profit
- In a bear market, short positions can gain more BTC as the price falls
# Inverse Contract Nature
Coin-margined contracts are also known as "inverse contracts" because their price has an inverse relationship with the underlying asset. When the underlying asset's price rises, less of the underlying asset is needed to buy one USD; when it falls, more of the underlying asset is required to buy one USD.
# Use Cases for Coin-margined Contracts
Coin-margined contracts are particularly well-suited for:
- Users who already hold specific cryptocurrencies and want to hedge against price volatility
- Traders looking to accumulate more cryptocurrency during market downturns
- Miners and long-term holders who want to hedge price fluctuation risks
- Traders who prefer to keep their profits in cryptocurrency rather than stablecoins
# Risk Characteristics
The risk profile of coin-margined contracts differs from USDT-margined contracts:
- When the price of the underlying asset decreases, the margin requirements for coin-margined contracts increase. This means users need to hold more of the underlying asset to maintain their positions.
- The inverse relationship between price and margin requirements creates a unique dynamic where falling prices increase the required margin, which can accelerate liquidations in declining markets.
# Comparison with USDT-margined Contracts
| Feature | Coin-margined Contracts | USDT-margined Contracts |
|---|---|---|
| Margin Currency | Underlying cryptocurrency (BTC, ETH, etc.) | USDT |
| Pricing Unit | USD | USDT |
| PnL Currency | Underlying cryptocurrency | USDT |
| Risk in Bull Market | Lower margin requirements | Constant margin requirements |
| Risk in Bear Market | Higher margin requirements | Constant margin requirements |
| Ideal for | Cryptocurrency holders, miners | Traders focused on USD returns |