For those who have just entered the cryptocurrency world, are you confused about contract trading? 😵 Don't panic, today I will introduce the basic knowledge of cryptocurrency contracts to help you get started easily~
1. What is a cryptocurrency contract
Contracts are also called futures, in English it's FUTURE. In the cryptocurrency realm, making a contract trade is like signing a contract with another person 📄. Contracts are measured in units, and the minimum trading unit is one contract.
Contracts can be newly signed, for example, if you sign a new contract with someone, the total number of contracts in the world will increase by 1. It is also possible that someone transfers an existing contract to you, in which case the total number of contracts remains unchanged.
2. The difference between contracts and spot trading
Spot trading is a transaction where money is exchanged for goods, with both parties cleared 💴, while in cryptocurrency contract trading, the parties generally do not trade physical goods but rather expectations of future prices.
For example, if someone believes that Bitcoin will rise in the future 📈 and another person believes it will fall 📉, they can sign a contract to bet against each other. The essence of a contract is a zero-sum game; the money one party earns is the money lost by the other party.
The biggest difference between contracts and spot trading is the ability to leverage and short sell. Leverage is used to adjust the margin ratio, and the leverage multiple for each contract is set by the exchange based on the volatility and liquidity of the currency.
3. The secret of leverage
Assuming Bitcoin is currently 50,000 yuan each, and the margin for one contract is 50 yuan. If you open a 100x leverage, the contract value would be 5,000 yuan. If you only have 50 yuan in your wallet, and the price drops by 1%, you will be liquidated 😱.
But if you have 2,500 yuan in your wallet, all of this money can be used as margin, making the actual leverage 2x instead of 100x. Therefore, the size of leverage depends not only on the chosen leverage ratio but also on the funds in your wallet.
If you are new to cryptocurrency contracts, you must operate cautiously, learn and understand more~ If you have any questions, feel free to leave a message, and we can discuss together #美国加征关税 #大而美法案 $BTC$ETH
