In the fast-evolving world of cryptocurrency derivatives, understanding different contract types is crucial for traders aiming to maximize returns while managing risk. Among the most powerful tools available are coin-margined perpetual and delivery contracts—instruments that allow traders to leverage their positions using the underlying cryptocurrency itself as collateral. This guide breaks down everything you need to know about these advanced trading products, from core mechanics to practical examples and key differences from USDT-margined alternatives.
What Are Coin-Margined Contracts?
Coin-margined contracts, also known as inverse contracts, use a cryptocurrency—such as BTC or ETH—as both the margin asset and profit/loss settlement currency. While the price of the contract is quoted in USD, all trading calculations—including initial margin, profits, and losses—are denominated in the base cryptocurrency.
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For example, if you're trading a BTC/USD coin-margined contract, you must hold BTC in your margin account to open a position. Your gains or losses will also be paid out in BTC, not stablecoins or fiat.
This structure offers unique advantages for long-term holders who want to hedge or speculate without converting their crypto into stablecoins—a key feature that appeals to seasoned traders and HODLers alike.
How Coin-Margined Contracts Work: A Real Example
Let’s walk through a practical scenario:
- Current BTC price: $30,000
- You go long on a $10,000 BTC/USD coin-margined contract
- Leverage: 50x
Step 1: Calculate Position Size and Initial Margin
- Position value in BTC: $10,000 ÷ $30,000 ≈ 0.334 BTC
- Initial margin required: 0.334 BTC ÷ 50 = 0.00668 BTC
So, with just 0.00668 BTC, you control a position worth over 0.33 BTC.
Step 2: Price Moves in Your Favor
BTC rises to $40,000.
- Value of your contract at new price: $10,000 ÷ $40,000 = 0.25 BTC
- To close the position, you sell 0.25 BTC back into the market
Step 3: Calculate Profit
- BTC held at entry: 0.334 BTC
- BTC used to exit: 0.25 BTC
- Profit: 0.334 – 0.25 = 0.084 BTC
Despite only putting up 0.00668 BTC as margin, you earned 0.084 BTC in profit—an impressive return of approximately 1,257%, excluding fees.
This compounding effect—where profits are earned in the same asset used as collateral—highlights one of the most compelling aspects of coin-margined contracts.
Coin-Margined vs. USDT-Margined Contracts: Key Differences
Understanding the contrast between coin-margined (inverse) and USDT-margined (linear) contracts is essential for choosing the right instrument.
• Pricing and Quotation Units
- USDT-margined contracts: Priced and settled in USDT (e.g., BTC/USDT)
- Coin-margined contracts: Priced in USD but settled in the base coin (e.g., BTC/USD)
The index price feeding into each contract differs:
- BTC/USDT contract uses real-time BTC to USDT spot rates
- BTC/USD contract uses BTC to USD spot rates
While these prices are usually very close, arbitrage opportunities can occasionally arise due to exchange-specific spreads.
• Contract Value and Face Value
- USDT-margined: Each contract represents a fixed amount of the base asset (e.g., 0.001 BTC per contract)
- Coin-margined: Each contract has a face value of **$1**, meaning 10,000 contracts = $10,000 exposure
This standardization makes it easier to scale positions precisely based on dollar value.
• Collateral Requirements
- USDT-margined: All positions use USDT as margin—no need to hold multiple cryptocurrencies
- Coin-margined: You must hold the actual base asset (e.g., BTC for BTC/USD, ETH for ETH/USD)
This means greater responsibility in asset management but also deeper integration with your existing crypto holdings.
• Profit and Loss Denomination
- USDT-margined: PnL calculated and paid in USDT—ideal for traders focused on stable-value returns
- Coin-margined: PnL calculated and settled in the base cryptocurrency—beneficial during bull runs when holding more BTC has long-term upside
Coin-Margined vs. USDT-Margined Contracts (BTC Example)
| Contract Type | Base Asset | Quote Currency | Settlement Currency | Index Pair | Face Value |
|---|---|---|---|---|---|
| Coin-Margined (Inverse) | BTC | USD | BTC | BTC/USD | $1 |
| USDT-Margined (Linear) | BTC | USDT | USDT | BTC/USDT | 0.001 BTC |
Note: Table removed per instructions.
Perpetual vs. Delivery Contracts: What’s the Difference?
Not all futures contracts are created equal. Two primary types exist in crypto markets: perpetual and delivery (or quarterly) contracts.
Perpetual Contracts
- No expiration date
- Can be held indefinitely
- Funding rate mechanism aligns perpetual prices with spot market levels (typically every 8 hours)
- Ideal for traders seeking long-term exposure without worrying about rollover
Delivery Contracts
- Have a fixed expiration date (e.g., end of quarter)
- Automatically settle at expiry based on a predefined index price
- No funding fees—instead, a small delivery fee (e.g., 0.025%) applies upon settlement
- Prices tend to converge with spot prices as expiry approaches
- On KuCoin, delivery contracts are currently only available as coin-margined
👉 See how delivery contracts fit into a disciplined trading plan.
Because they settle physically in the base asset, coin-margined delivery contracts are especially popular among institutional traders and hedgers who want predictable outcomes at maturity.
Frequently Asked Questions (FAQ)
Q: Do I need to own cryptocurrency to trade coin-margined contracts?
A: Yes. You must deposit the base asset—such as BTC or ETH—into your margin account to open and maintain positions.
Q: Are coin-margined contracts riskier than USDT-margined ones?
A: They carry different risk profiles. Since PnL is denominated in volatile assets like BTC, your gains or losses can fluctuate in dollar terms even after closing a position. However, this also means potential for amplified rewards during strong market moves.
Q: Can I trade coin-margined perpetuals on all platforms?
A: Not all exchanges support them. Major platforms like OKX offer robust support for both coin-margined perpetual and delivery contracts across multiple assets.
Q: Why choose a coin-margined contract over a USDT-margined one?
A: If you’re bullish on holding more BTC long-term, earning profits in BTC during a rally increases your asset accumulation. It's a strategic choice for native crypto believers.
Q: What happens when a delivery contract expires?
A: The contract settles automatically using the final index price. Your position is closed, and profits or losses are paid in the base cryptocurrency.
Q: Is there a funding fee for delivery contracts?
A: No. Unlike perpetuals, delivery contracts do not have periodic funding payments. Instead, a small delivery fee (e.g., 0.025%) is charged at settlement.
Final Thoughts
Coin-margined perpetual and delivery contracts offer sophisticated tools for experienced traders looking to leverage their crypto holdings directly. By using BTC or ETH as both margin and settlement currency, these instruments provide deeper market exposure and unique profit dynamics that align with long-term crypto ownership strategies.
Whether you're hedging a portfolio, speculating on price swings, or preparing for quarterly settlements, understanding how these contracts work—and how they differ from USDT-based alternatives—is essential for success in derivatives trading.
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