The difference between virtual currency leverage and contracts

The difference between virtual currency leverage and contracts is mainly reflected in: transaction object: leverage trading is cryptocurrency, and contract trading is futures or perpetual contracts. Trading method: borrowing funds for leverage trading, and direct futures trading for contract trading. Risk: The risk of leveraged trading is higher, and the risk of contract trading depends on the margin level. Settlement: Leverage transactions are settled at spot prices, and contract transactions are settled at futures prices. Leverage ratio: The leverage ratio of leveraged trading is high, and contract trading is restricted by the exchange. Purpose: Leverage trading is used to amplify profits, and contract trading is used for arbitrage or speculation.

The difference between virtual currency leverage and contracts

1. Transaction object

• Leverage: cryptocurrency itself
• Contract: futures or perpetual contracts linked to cryptocurrency (permanent contracts refer to no Futures contract with expiry date)

2. Trading method

• Leverage: Users borrow funds to increase trading positions
• Contract: Users directly trade futures or perpetual contracts and hold positions in the form of margin

3. Risks

• Leverage: higher than contract trading, you may suffer losses exceeding the deposit amount
• Contract: depending on the margin level and leverage ratio, you usually cannot suffer losses exceeding the margin amount

4. Settlement

• Leverage: spot price settlement, delivery or receipt of the underlying asset when trading
• Contract: futures or perpetual contract price settlement, transaction’s expectation of future prices

5. Leverage ratio

• Leverage: 2 -100 times ranging
• Contract: exchange limit, between 10-50 times

6. Purpose

• Leverage: to amplify trading profits
• Contract: hedging risk, arbitrage trading or speculating on price fluctuations

Summary

Leveraged trading and contract trading are financial derivatives with different trading methods and risks. Leveraged trading involves borrowed funds, while contract trading involves futures or perpetual contracts. The risk of leveraged trading is higher, while the risk of contract trading depends on the margin level and leverage ratio.

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