Crypto Contract Essentials: Opening 1000U with 10x Leverage vs 2000U with 5x Leverage, the Difference Goes Beyond Margin!!!
In crypto contract trading, opening 1000U with 10x leverage and 2000U with 5x leverage both seem to have a nominal value of 10000U, but the actual risk and operational logic are quite different.
In an ideal scenario, without considering other factors, a 10x leverage would be liquidated with a 10% price fluctuation, whereas a 5x leverage would require a 20% fluctuation to trigger liquidation. However, in actual trading, various costs affect the results: assuming a 0.1% transaction fee, both would deduct 10U, resulting in effective margins of 990U and 1990U, with nominal values adjusted to 9900U and 9950U.
In a one-sided market, the funding rate of perpetual contracts can also have an impact. If the average daily rate is 0.15%, holding for 10 days would incur losses of about 49.5U and 49.75U respectively, which could reduce the liquidation fluctuation range by approximately 0.5%. Adding the 0.5% maintenance margin rate set by the platform to prevent liquidation, the former may be liquidated with a fluctuation of about 9%, while the latter can withstand around 19% fluctuation.
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