Currently, most centralized exchanges provide U-margined contracts (USD-margined contracts) and currency-margined contracts ( COIN-margined contracts) two perpetual contract products. As the name suggests, U-based contracts refer to contracts priced in stablecoins such as USDT, USDC, and BUSD, while currency-based contracts are contracts settled in corresponding tokens (such as BTC, ETH, and XRP). Due to different pricing methods, the two contracts have their own advantages and disadvantages and are more suitable for the market environment and investment strategies.
The advantages and disadvantages of U-based contracts
Advantages:
Easy to understand: The value of the stablecoin is pegged to the U.S. dollar at a ratio of 1:1, making it easier to understand and calculate. For example, when you make a profit worth 100 USDT, you can easily estimate that the profit is about $100, and the settlement of the contract is more intuitive.
Higher flexibility: You can use stablecoins to open positions or settle different futures contracts without purchasing corresponding tokens to fund futures positions, reducing unnecessary time costs and transactions cost.
More stable: Compared with ordinary tokens, the value of stablecoins basically remains constant, so when the market fluctuates violently, you basically don’t need to consider the change in the value of your position due to changes in its value. , helps reduce risk.
Disadvantages:
Limited potential returns: When using stablecoins such as USDT for contract trading, you need to allocate a portion of your assets to USDT. This means that compared to holding other tokens with room for appreciation (such as BTC and ETH), the value of USDT is difficult to change, and your potential income is close to zero.
There is a risk of de-anchoring: The biggest risk of stablecoins is the risk of de-anchoring. There have been many de-anchoring events in the past few months: affected by the bankruptcy of Silicon Valley Bank in March this year, USDC continued to de-anchor; USDT also de-anchored in mid-June, and many traders entered the market to take arbitrage. Although the prices of these stablecoins returned to normal levels shortly after the incident, the unanchoring still had a serious negative impact on the contracts and the entire market.
CoinAdvantages and Disadvantages of Standardized Contracts
Advantages:
Potential value gains: Since coin-standardized contracts are priced and settled in the base token, you can directly participate in the The price of the token is changing. This means that in a bull market or if you are very confident in the future value of the token, you can make greater profits through the contract.
No need to hold stablecoins: For miners or long-term holders of tokens, coin-based contracts allow them to open positions directly without converting their crypto assets into stablecoins, thus avoiding Selling tokens at a lower price results in unnecessary losses. At the same time, you don’t have to consider the risk of stablecoin de-anchoring.
You can enjoy exchange rebates: Holding currency-based contracts on some centralized exchanges such as MEXC can enjoy certain position rebates, which is very attractive to some traders who hold long-term positions. Powerful.
Disadvantages:
Volatility Risk: Likewise, because coin-standardized contracts are denominated and settled in the base token, traders are exposed to the base cryptocurrency Risk of price fluctuations. If the market fluctuates violently, traders may face larger losses.
The threshold is relatively high: Coin-based contracts require traders to hold a certain amount of the benchmark token, which may limit the participation of some traders, especially those without large amounts of cryptocurrency. At the same time, price calculations are also more complex, and traders need to fully understand how contracts operate, margin requirements, leverage ratios, etc., which is very unfriendly to novices.
To summarize
To sum up, there are differences between the U standard and the currency standard in terms of flexibility, potential returns and risk levels. Big difference. You can simply understand that the U standard is more suitable for the bear market because of its lower risk, while the currency standard is more suitable for the bull market because you can enjoy the potential value growth of the token, but which contract to choose? You also need to consider your own risk tolerance, trading goals, contract terms and other factors before making a judgment.