Coin-margined contracts use cryptocurrencies as settlement currencies. Instead of holding stablecoins as margin, they are denominated and settled in the underlying cryptocurrency. Each contract has a multiplier that reflects the value of the contract. For example, a BTC contract is worth $100, while an ETH contract is worth $10. Contracts have different expiration dates, including perpetual and quarterly contracts. The advantage of coin-margined contracts is that they use cryptocurrencies as settlement currencies, which can provide an ideal option for miners or holders. Since the contract is settled in the underlying cryptocurrency, the proceeds can be used for long-term capital accumulation. In addition, as prices continue to rise, the value of the collateral also increases accordingly, so coin-margined contracts are an excellent way to increase cryptocurrency holdings.
When hedging positions in the contract market, there is no need to convert held assets into stablecoins. If hedging is to be implemented, simply establish a short position in the coin-based quarterly contract at any exchange; if the price of the underlying asset falls, the profits from the contract position are enough to offset the losses in the portfolio. Additionally, coin-based contracts also avoid the possibility of forced liquidation, in which case the counterparty will automatically force liquidate to fill the position of the bankrupt trader, potentially leading to automatic position reduction for the trader.
U-based contracts use assets pegged to the US dollar as the settlement currency, including USDT. Contracts have different expiration periods, including perpetual contracts and quarterly contracts. Each contract specifies the delivery quantity of a single contract's underlying asset, also known as the 'contract unit'. The biggest advantage of settling in USDT is that it makes it easy to calculate returns in fiat currency, making U-based contracts more intuitive. A universal settlement currency can significantly enhance trading flexibility, as multiple futures contracts can use the same settlement currency without needing to purchase the underlying token to fund the contract position. Therefore, when trading with USDT, there is no need for additional currency exchange, saving unnecessary fees.
In times of severe market volatility, U-based contracts can effectively reduce the risk of significant price fluctuations. Compared to coin-based contracts, U-based contracts can effectively mitigate the risk of large price swings during severe market fluctuations. This is because U-based contracts are priced and settled in USDT, which is generally more stable than cryptocurrency prices. In cases of significant price volatility, the settlement currency of U-based contracts can stabilize the contract value, thereby reducing the risk for investors.
Moreover, the settlement currency of U-based contracts also makes trading more intuitive. For example, the value of one USDT is almost equivalent to 1 USD, making it easier for investors to calculate their profits or losses. During the trading process, U-based contracts use a universal settlement currency (such as USDT) for pricing and settlement, which also increases trading flexibility. At the same time, multiple contracts can use the same settlement currency, eliminating the need to purchase the underlying token as collateral for the contract position, thus saving some costs.
It is also important to note that when going long, the returns on U-based contracts are less than those on coin-based contracts, but the risk of U-based contracts is lower. When going short, the returns on U-based contracts are greater than those on coin-based contracts, but the risk of U-based contracts is higher.
In summary, U-based contracts and coin-based contracts each have their own advantages and characteristics. Investors can choose the contract type that suits them based on their risk tolerance and investment goals.
