In an uncertain world, with all aspects of the economy and politics in decline, the value of Bitcoin is rising sharply in reverse.
Bitcoin price broke through $18000 on November 18, 2020.
Many analysts attribute it to the inflow of institutional funds.
It is reported that MicroStrategy, a US business services company, bought $425 million worth of BTC in two months; and Square, a financial technology company, converted $50 million of its balance sheet into Bitcoin.
The industry believes that this wave of market is preparing for the coming bull market. According to the prediction of PlanB, the creator of S2F model, Bitcoin price has a chance to exceed $288000 in 2024.
Under this circumstance, many people begin to store cryptos. The usual ways of storing cryptos are fixed investment and mining, but few people can still make a fixed investment in this high price position. As we all know, the mining output has been cut off since the third halving of Bitcoin in May this year while the computing power of the whole network is still growing. It is increasingly difficult for ordinary people to participate in the mining. In fact, the coin-margined contract trading is used by many people as a means of storing cryptos in this market.
Coin-based perpetual contract refers to the digital crypto contract with holding crypto as the price and trading unit, having no delivery date and supporting the two-way trading. The biggest difference between it and USDT-margined contract is that the position opening and final delivery of coin-margined contract both adopt the corresponding underlying products. For example, if you want to go long or short BTC or ETH, you need to deposit BTC or ETH into the contract account, and the final loss or income is also settled by BTC or ETH. Nevertheless, USDT is used for both the position opening and final delivery of U-margined contract. You just need to deposit USDT into the contract account whether you go long or short the crypto, and USDT is adopted for the settlement of final loss and income.
This difference makes coin-margined contract suitable for going long. Taking BTC / USDT as an example, when BTC is used as margin to go long BTC, if earned eventually, the actual income will be more due to the price rise. When using BTC as margin to go short BTC, the actual income will be decreased by the price drop regardless of whether BTC is earned or lost eventually.
For example, you go long with the coin-margined contract when BTC price is of 15000USDT, if the BTC price rises and you earn 1BTC, the BTC you have earned from the price rise will be increased in value correspondingly.
You go short with the coin-margined contract when BTC price is of 15000 USDT, if the BTC price falls and you earn 1 BTC, the BTC you have earned will decrease correspondingly. However, you go short with the U-margined contract, if the BTC price falls and you earn 1btc, there will be no asset shrinkage even under the extreme market since USDT is the profit unit. Besides, the condition of u-margined income is clear, which is relatively friendly to novices.
Nonetheless, for hoarders who are optimistic about the value of BTC for a long time, they do not care much about the changes in asset prices but only the amount of cryptos they earn. So they can earn and hoard cryptos no matter they go long or short. Certainly, in order to hedge against risk, users can go short with the u-margined contract and go long with the coin-margined contract simultaneously.
Compared with the fixed investment and mining, this kind of crypto hoarding is able to help users gain high income with small capital and leverage, and then users can just wait for the BTC price to rise to $100000.
Other platforms are also laying out the coin-margined contract now. Previously, MXC Global announced that it would soon launch the coin-margined perpetual contracts for multiple popular cryptos such as BTC, ETH and FIL which support free adjustment of 1–100x leverage.
In addition, please note that there are also some shortcomings in coin-margined transactions.
For instance, it is troublesome for coin-margined contract to open multiple kinds of positions. If you are optimistic about ETH while holding BTC and the account ETH is insufficient, you can only change USDT into ETH to be used as the margin. But with the U-margined contract, you can open the position with just one click and change as you without the need to hold the underlying assets. Therefore, the coin-margined contract is more suitable for old users while new users are recommended to use the U-margined contract.
If you do not want to hoard BTC for a while but want to invest in other cryptos by USDT, you can select the U-margined contract. For example, some people like to invest in small cryptos firstly, increase their assets utilizing the soaring market of those small currencies, and then change them into the cryptos with long-term bullishness. For high-level players, the investment strategy is often not just a single kind but in multi-element combination.