What Are USDⓈ-Margined Futures and Coin-Margined Futures
Binance offers both USDⓈ-Margined Futures and Coin-Margined Futures products. Here are their key characteristics:
|Coin-Margined Futures||USDⓈ-Margined Futures|
|Collateral||Cryptocurrency (i.e. BTC, ETH)||USDT, BUSD|
Coin-Margined Futures contracts on Binance offer the following characteristics:
- Settlement in cryptocurrency: contracts are denominated and settled in the underlying cryptocurrency, this eliminates the need to hold stablecoins as collateral.
- Contract Multiplier: Contract multiplier represents the value of a contract. Each BTC futures contract represents 100 USD, while each ETH futures contract represents 10 USD. For example, 1,000 USD of BTCUSD Quarterly 1225 equals 100 USD x 10 contracts, and 1,000 USD of ETHUSD Quarterly 1225 equals 10 USD x 100 contracts.
- Expiration: Perpetual, Quarterly, and Bi-Quarterly
Meanwhile, USDⓈ-Margined Futures contracts offer the following characteristics:
- Settlement in USD-pegged assets: contracts are denominated and settled in USDT or BUSD.
- Expiration: Perpetual and Quarterly.
- Clear pricing rules: Each futures contract specifies the base asset's quantity delivered for a single contract, also known as "Contract Unit". For instance, BTC/USDT, ETH/USDT, and BCH/USDT futures contracts represent only one unit of their respective base asset, similar to spot markets.
Advantages of Coin-Margined contracts
Binance’s Coin-margined contracts are denominated and settled in cryptocurrency. For example, to open a position in BTCUSD Quarterly 1225, you can simply fund the initial margin in Bitcoin.
If you are a miner or a HODLer, this is ideal for you. As contracts are settled in the underlying cryptocurrency, any profits can contribute to your long-term stack. Furthermore, as prices continue to rise, the value of your collateral will increase correspondingly. This is simply a great way to increase your cryptocurrency holdings over the long run.
You can also hedge your positions in the futures market without converting any of the holdings into USDT. As such, you do not need to sell any cryptocurrencies at a compromised price.
To hedge, simply open a short position in any Binance COIN-margined quarterly futures. If the price of the underlying asset goes down, profits from the futures position can offset your portfolio’s losses.
Advantages of USDⓈ-Margined contracts
USDⓈ-Margined contracts are linear futures quoted and settled in USDT or BUSD. One of the key benefits of USDT or BUSD settlement is that you can easily calculate your returns in fiat. This makes USDⓈ-Margined contracts more intuitive. For example, when you make 500 BUSD in profit, you can easily estimate that the profit is worth approximately $500 - since the value of 1 BUSD is pegged closely to 1 USD.
Additionally, a universal settlement currency, such as BUSD or USDT, provides more flexibility. You can use the same settlement currency across various futures contracts (i.e., BTC, ETH, XRP, etc.). This eliminates the need to buy the underlying coins to fund futures positions. As such, you will not incur excessive fees as there is no additional conversion required when trading with USDT.
In periods of high volatility, USDⓈ-Margined contracts can help reduce the risk of large price swings. Thus, you do not need to worry about hedging your underlying collateral exposure.