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Differences Between USDT-Settled and Coin-Settled Perpetual Contracts

In perpetual futures trading, contracts are generally divided into two types: USDT-settled perpetual contracts (USDT-M) and coin-settled perpetual contracts (COIN-M).

The core difference lies in the margin and settlement assets, which leads to variations in risk structure and suitable use cases.

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I. Different Settlement and Margin Assets

1) USDT-Settled Perpetual Contracts (USDT-M)

  • Use USDT as margin and settlement asset.

  • Profit and loss (PnL) and funding rates are settled in USDT.

  • Margin value remains relatively stable and is unaffected by coin price fluctuations.

Features:

  • Intuitive and easy-to-calculate returns.

  • Relatively lower volatility.

  • Suitable for most traders, especially beginners.

2) Coin-Settled Perpetual Contracts (COIN-M)

  • Use the corresponding cryptocurrency (e.g., BTC, ETH) as margin and settlement asset.

  • Profit and loss and funding rates are settled in that cryptocurrency.

  • Margin value fluctuates with the coin price.

Features:

  • Allows accumulation of more of the underlying cryptocurrency through trading.

  • Returns can be significantly amplified during bull markets.

  • Requires higher risk management skills.

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II. Differences in Risk Structure and Volatility

USDT-Settled Perpetual

Coin-Settled Perpetual

Stable margin value

Margin value fluctuates with coin price

More controllable risks

Liquidation risk rises when coin price falls

Easier to assess liquidation risk

Leverage effect is more pronounced in uptrends

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III. Comparison of Suitable User Types

User Profile
USDT-Settled
Coin-Settled

Beginner traders

✔ More intuitive and easier to use

✘

Prefer stable returns

✔ Lower volatility

✘

Want to accumulate BTC/ETH

✘

✔

Long-term holders (HODLers)

Can be used

✔ More suitable

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IV. Differences in Trading Experience

USDT-Settled Perpetual Contracts

  • Wide range of common trading pairs (e.g., BTCUSDT, ETHUSDT).

  • PnL displayed in USDT, making tracking and analysis more intuitive.

  • Better suited for daily trading and strategy execution.

Coin-Settled Perpetual Contracts

  • More suitable for medium-to-long-term strategies.

  • Often used in bull markets to "earn coins through contracts."

  • Higher entry barriers and require deeper risk understanding.

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V. Summary

  • USDT-settled perpetuals: Stable, intuitive, suitable for most users.

  • Coin-settled perpetuals: Suitable for long-term holders and traders looking to accumulate cryptocurrency-denominated assets.

It is recommended that beginners start with USDT-settled perpetual contracts and only consider coin-settled contracts after fully understanding leverage and risk mechanisms, based on their specific needs.

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