May 1, 2025
Binance offers leverage and contracts, both of which are financial trading derivatives, but there are essential differences in mechanism, risk structure, and applicable scenarios between leveraged trading and contract trading:
1. Leveraged Trading (Spot Leverage)
1. Mechanism: Borrowing funds to amplify spot positions; users actually hold assets (such as BTC, ETH) and leverage their assets to borrow for multiple buys or sells.
2. Leverage Ratio: Typically 3-10 times, much lower than contracts.
3. Fees: Borrowing interest must be paid, calculated hourly or daily.
4. Liquidation Rules: Forced liquidation is triggered when the collateral ratio falls below the maintenance margin rate.
2. Contract Trading
1. Mechanism: Does not actually hold the underlying assets; engages in long and short trades by predicting price fluctuations, using a margin system. Taking the recently launched PUNDIXUSDT perpetual contract as an example, it supports up to 75 times leverage.
2. Leverage Ratio: Can reach up to 75 times or even higher (depending on the cryptocurrency and platform rules).
3. Fees: No borrowing interest, but a funding rate must be paid (for perpetual contracts) to balance long and short positions.
4. Liquidation Rules: Uses marked price and forced liquidation mechanism, may experience 'wreckage' (losses exceeding margin) during extreme volatility.
