1. USD-Margined Contracts vs Coin-Margined Contracts
USD-Margined Contracts (also called linear contracts) are derivatives priced and settled in stablecoins like USDT or USDC. At most exchanges, these contracts exclusively use USDT for margin and settlement. Their primary advantage? Easy conversion to fiat currency values, making profit/loss calculations more intuitive for traders.
Coin-Margined Contracts (or inverse contracts) are settled in cryptocurrencies (e.g., BTC, ETH) rather than stablecoins. These allow crypto holders to trade without converting assets to stablecoins first. Key benefits include enhanced capital efficiency and seamless hedging opportunities for long-term holders.
| Feature | USD-Margined Contracts | Coin-Margined Contracts |
|---|---|---|
| Colloquial Name | Linear Contracts | Inverse Contracts |
| Settlement Currency | USDT | Cryptocurrency (e.g., BTC, ETH) |
| Margin Requirement | USDT | Native Crypto (e.g., BTC, ETH) |
| Holding Period | Unlimited | Unlimited |
| Leverage Types | Isolated/Cross Margin | Isolated/Cross Margin |
2. Setting Up USD-Margined or Coin-Margined Contracts
Exchanges typically offer hundreds of USD-margined pairs alongside BTC/ETH coin-margined options. Here’s how to select them:
2.1 Web Platform
- Navigate to the [Derivatives Trading] section and choose either [USDT-Margined Perpetual Contracts] or [Coin-Margined Perpetual Contracts].
- Within the trading interface, click the dropdown menu next to trading pairs to toggle between contract types.
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2.2 Mobile App
- Tap the [Contracts] tab and select [USDT Contracts] or [Coin-Margined Contracts] at the top.
3. Choosing Between Contract Types: Strategic Insights
3.1 When to Opt for Coin-Margined Contracts
- Ideal for crypto holders: Hedge positions without selling assets.
- Bull market advantage: Profits accrue in the native cryptocurrency, compounding long-term holdings.
- Tax efficiency: Avoids taxable events from crypto-to-stablecoin conversions.
3.2 When USD-Margined Contracts Shine
- USDT liquidity: Perfect for traders holding stablecoins but not other cryptos.
- Diverse pairs: Access to hundreds of trading pairs with high leverage (e.g., 500x).
- Simplified accounting: Direct fiat valuation streamlines performance tracking.
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FAQs: Quickfire Questions Answered
Q1: Can I switch between contract types mid-trade?
A: No—positions must be closed before changing margin types.
Q2: Which contract type has lower fees?
A: Fees are similar, but coin-margined trades may save on conversion costs for crypto holders.
Q3: Is one riskier than the other?
A: Both carry equal leverage risks, but coin-margined profits/losses fluctuate with the underlying crypto’s value.
Q4: Do exchanges offer more USD-margined pairs?
A: Yes, USD-margined markets typically support more altcoin pairs than coin-margined ones.