because of dominance
BNBUSDT
Perp
836.7
-3.72%
Trading Insight_News
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Double Risk From Coin-M Future? Compound Interest or Compound Loss?
When trading Futures, most traders only care about Entry price and Leverage. But there is a factor more critical to account survival during a crash Collateral Type. Derivatives money flow is split into two main categories: USDT-Margined (Using Stablecoin as collateral) and Coin-Margined (Using the Coin itself as collateral). Misunderstanding them exposes you will face double risks.
🔸 USDT-Margined, this is the modern market standard. You use USDT to Long, Short BTC.
No matter how Bitcoin price fluctuates, 1 USDT in your margin wallet is always 1 dollar.When Price Drops you only suffer losses on the position PnL. The risk is linear and easy to calculate.
🔸 Coin-Margined, this is the graveyard for many traders in a Downtrend. You use BTC to Long BTC.
Suppose you Long BTC. When BTC price crashes:Your Long position goes negative.The value of the BTC you used as collateral also drops.Liquidation Price arrives twice as fast as you calculated. The exchange liquidates you sooner because your collateral value is evaporating rapidly.When Coin-Margined OI is high, crashes are extremely brutal. Because upon liquidation, the exchange must sell the collateral onto the market 👉 Creating more sell pressure 👉 Price drops further 👉 More liquidations.
🔹 When to use Coin-M? Only when you are a Longterm Holder looking to Short for Hedging. When price drops, you profit in BTC from the Short, offsetting the drop in BTC price 👉 Preserving USD value.
When to use USDT-M? In all shortterm speculation cases. Keep your collateral in Stablecoin for psychological stability.Do not be greedy using Coin-M to Long in an Uptrend hoping for compound profit . When the market turns, compound profit turns into compound loss" and wipes out your account.
Be honest, have you ever blown up a Coin-M account because you did not account for the collateral value dropping?
News is for reference, not investment advice. Please read carefully before making a decision.
🔸 USDT-Margined, this is the modern market standard. You use USDT to Long, Short BTC.
No matter how Bitcoin price fluctuates, 1 USDT in your margin wallet is always 1 dollar.When Price Drops you only suffer losses on the position PnL. The risk is linear and easy to calculate.
🔸 Coin-Margined, this is the graveyard for many traders in a Downtrend. You use BTC to Long BTC.
Suppose you Long BTC. When BTC price crashes:Your Long position goes negative.The value of the BTC you used as collateral also drops.Liquidation Price arrives twice as fast as you calculated. The exchange liquidates you sooner because your collateral value is evaporating rapidly.When Coin-Margined OI is high, crashes are extremely brutal. Because upon liquidation, the exchange must sell the collateral onto the market 👉 Creating more sell pressure 👉 Price drops further 👉 More liquidations.
🔹 When to use Coin-M? Only when you are a Longterm Holder looking to Short for Hedging. When price drops, you profit in BTC from the Short, offsetting the drop in BTC price 👉 Preserving USD value.
When to use USDT-M? In all shortterm speculation cases. Keep your collateral in Stablecoin for psychological stability.Do not be greedy using Coin-M to Long in an Uptrend hoping for compound profit . When the market turns, compound profit turns into compound loss" and wipes out your account.
Be honest, have you ever blown up a Coin-M account because you did not account for the collateral value dropping?
News is for reference, not investment advice. Please read carefully before making a decision.
Disclaimer: Includes third-party opinions. No financial advice. May include sponsored content. See T&Cs.