What Are Coin-Margined Perpetual Contracts?
Coin-margined perpetual contracts, also known as inverse contracts, are derivative trading products settled in cryptocurrencies like BTC or ETH. Traders specify their position size in USD but use the base currency (e.g., BTC for Bitcoin contracts) for margin, profits, and losses. Key features include:
- Leverage: 1× to 125×
- Settlement: In the native token (e.g., BTC for Bitcoin contracts)
- Use Case: Ideal for traders holding the underlying asset who want to hedge or speculate.
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How Are Coin-Margined Contracts Priced?
These contracts use USD-denominated pricing, though all profits/losses are calculated in the contract’s base currency. Each contract typically represents $10 USD in value.
Coin-Margined vs. USDT-Margined Contracts: Key Differences
| Feature | Coin-Margined Contracts | USDT-Margined Contracts |
|---|---|---|
| Settlement Currency | Native token (BTC, ETH, etc.) | USDT |
| Risk Profile | Higher volatility | Lower volatility |
| Profit Potential | Gains compound if token appreciates | Stablecoin-denominated returns |
| Best For | Long-term holders, bullish traders | Risk-averse traders |
Advantages of Coin-Margined Contracts:
- Dual Profit Potential: Earn from price movements and token appreciation.
- Hedging: Offset spot portfolio risks without converting to stablecoins.
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FAQs About Coin-Margined Perpetual Contracts
Q1: Can I lose more than my initial margin?
A: No, exchanges implement auto-liquidation to limit losses to your collateral.
Q2: How is funding calculated?
A: Paid/received every 8 hours based on the price difference between the contract and spot markets.
Q3: Why choose coin-margined over USDT contracts?
A: Preferred by traders expecting base token price appreciation or avoiding stablecoin exposure.
Q4: What’s the minimum investment?
A: Varies by platform; some allow positions as small as $10 equivalent.
Q5: How are liquidations handled?
A: Positions close automatically if margin falls below maintenance level.
Q6: Are there tax implications?
A: Yes—consult a tax professional, as crypto-to-crypto trades may be taxable events.
Strategic Considerations
- Volatility Management: Use stop-loss orders to mitigate risks.
- Leverage Caution: Higher leverage amplifies both gains and losses.
- Market Timing: Monitor macroeconomic factors affecting crypto prices.
By mastering coin-margined contracts, traders gain flexibility in bullish markets while retaining asset ownership. Always practice with small positions before scaling up.