The difference between crypto and U-margined futures

OKX offers both crypto-margined and U-margined (USDT-margined and USDC-margined) futures products. They're different in terms of:

Quote currency

One important difference is the quote currency, which affects the price index of crypto-margined vs. U-margined pairs. For example, a U-margined BTC/USDT perpetual futures uses the price of OKX spot BTC converted to USDT. Meanwhile, a crypto-margined BTC/USD perpetual futures uses the price of OKX spot BTC converted to USD.

Face value

The face value of a contract is the amount of asset that's being traded per contract. The face value of U-margined futures depends on the underlying quote currency. For example, BTC/USDT contract have a face value of 0.01 BTC each, meaning the face value of crypto-margined futures will be in USD. For example, BTC/USD contract have a face value of 100USD each.

Margin

All U-margined perpetual futures use the quote currency USDT/USDC as margin, which allows you to make perpetual futures trades with USDT or USDC assets. For a crypto-margined perpetual futures, you'll need to hold the corresponding cryptocurrency assets as margin. Using the BTC/USD contract as an example, you'll have to deposit or transfer BTC as margin before being able to trade.

Settlement

U-margined futures use the quote currency USDT or USDC to calculate profit and loss (PnL), while crypto-margined contracts use the corresponding cryptocurrency to calculate the PnL. For example, a BTC/USD contract PnL will be settled in BTC.

Impact on gains: linear nature vs convexity

U-margined futures growth is linear as the quote currency is in USD, meaning portfolio growth increases by the same proportion of the value of your contract position. Meanwhile, crypto-margined futures growth would show convexity because the underlying crypto asset held also moves relative to your contract position.

Understanding these differences can be used to your advantage, considering different market conditions:

  • You may choose long crypto-margined futures during the bull market to amplify growth, and short U-margined futures during the bear market.

  • There are convex payoff risks in holding crypto-margined futures as users lose more when the market drops. This is because the value of cryptocurrency relative to USD doesn't change in a proportionate amount like stablecoin.

  • Remember, for a crypto-margined futures, you must hold an asset. For U-margined futures, you don't need to hold any crypto assets.

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