Introduction to Cryptocurrency Investment: What are currency standard contracts and U standard contracts? How to use it?

With the rapid development of the digital currency market, cryptocurrency derivatives trading has attracted increasing attention from investors. Among many trading tools, contract trading has become a trading method favored by many investors due to its leveraged trading characteristics and high risk and high returns. However, for beginners, the concepts of coin-prime contracts and U-prime contracts are often confusing. This article will analyze the characteristics, differences and their application in cryptocurrency investment in detail.

What is a currency standard contract?

A currency standard contract is a derivative contract that uses cryptocurrencies as margin and settlement currency. In this model, investors use Bitcoin or other cryptocurrencies as collateral to trade. For example, in a Bitcoin perpetual contract, traders can use Bitcoin as margin and settle profit and loss in Bitcoin. A distinctive feature of this contract model is that investors can trade directly within the cryptocurrency ecosystem without having to convert assets into fiat currencies.

The advantage of currency-based contracts is that they reduce the frictional cost of fiat currency exchange and maintain the closure of the cryptocurrency ecosystem. For investors who hold cryptocurrencies for a long time, this trading method can achieve leveraged trading and risk hedging without selling the original crypto assets. But it also has certain limitations, such as when the price of the underlying asset fluctuates significantly, the margin may shrink rapidly, increasing the risk of liquidation.

What is a U-based contract?

In contrast, U-standard contracts are derivative contracts that use stablecoins such as USDT (Tether) as margin and settlement currencies. As a stablecoin anchored to the US dollar, USDT has relatively stable value, which provides investors with a more intuitive way to determine margin. In U-main contracts, whether Bitcoin, Ethereum or other cryptocurrencies are traded, margin and profit and loss are denominated and settled in USDT.

The main advantage of U-standard contracts is that they reduce the impact of currency price fluctuations on margin. Due to the relative stability of USDT, investors can focus more on price changes in the underlying asset trading without having to worry too much about the fluctuations in the margin itself. This model is especially suitable for investors who want to obtain a more predictable trading environment. At the same time, U-standard contracts are also convenient for calculating profit and loss, because profit and loss are denominated in stablecoins anchored by US dollars.

From the perspective of risk management, the two contracts have their own advantages. Coin-standard contracts are suitable for investors who are firmly optimistic about the long-term value of cryptocurrencies and want to maintain exposure to crypto assets; while U-standard contracts are more suitable for investors who pursue a relatively stable trading environment and hope to reduce the impact of currency price fluctuations. Which contract to choose needs to be decided based on personal investment strategy, risk tolerance and market judgment.

It should be emphasized that cryptocurrency derivatives trading has extremely high risks whether you choose a currency standard or a U standard contract. Leveraged trading may lead to huge losses exceeding the principal. Investors must fully understand the trading mechanism, strictly control positions, and formulate strict risk management strategies. For most investors, it is crucial to participate rationally and cautiously in crypto derivatives trading.

What is the difference between U-standard contracts and currency-standard contracts?

Binance's [Contract Trading] has two types of commodity: ①U standard contracts (USD-M Futures) and ②Coin-M Futures. The easiest way to distinguish between the two is that the basic contract has a CM suffix (for example: BTCUSD CM).

The contract types are divided into [Futures Delivery Contract] and [Permanent Contract]. The difference between the two is that there is no delivery date for perpetual contracts.

1. Characteristics and advantages of U-based contracts:

Definition: A U-standard contract refers to a contract value denominated in US dollars, such as a Bitcoin/USD (BTC/USD) contract. Leverage long and short two-way trading can be used.

Settlement in assets pegged to the US dollar: Contracts are denominated and settled in USDT or USDC.

Expiry period: Perpetual contracts, quarterly contracts and second quarterly contracts.

Pricing rules are clear: Each contract stipulates the delivery quantity of a single contract underlying asset, also known as the "contract unit". For example: Similar to the spot market, the BTC/USDT, ETH/USDT and BCH/USDT contracts represent only one unit of their respective underlying assets.

Featured advantages: When the market fluctuates violently, U-standard contracts can effectively reduce the risk of large price fluctuations. For example, in a downward market, the profits obtained by short orders are calculated in USDT, a US dollar stablecoin, and there will be no losses.

2. Characteristics and advantages of currency standard contracts:

Definition: A currency standard contract refers to a contract value denominated in cryptocurrency, such as a Bitcoin (BTC) contract. When the cryptocurrency price rises, investors can make profits; conversely, when the cryptocurrency price falls, investors will lose money.

Both mortgage and settlement are carried out in cryptocurrencies : contracts are mortgaged and settled in cryptocurrencies such as BTC, ETH, BNB.

Contract period: It is divided into perpetual contracts, quarterly contracts and two-quarter contracts.

Contract Multiplier: The contract multiplier represents the value of the contract. For example, the BTC currency standard contract multiplier is US$100. The contract multiplier of mainstream digital currencies outside BTC is usually US$10, but specific currencies may vary.

Funding rate: Applicable to perpetual contracts only. Depending on the price difference between the contract price and the spot price, the funding rate is paid to the long or short traders every eight hours (the duration may change according to the market conditions).

3. The difference between U-based contract (BTCUSDT) and basic contract (BTCUSD CM)

The main differences between U-primary contracts and currency-primary contracts
Comparison items	U-Normal Contract (USD-M Futures)	Coin-M Futures
Quotation unit	Both mortgages and settlements are denominated in US dollars (or USDT/USDC)	Mortgage and settlement are both in cryptocurrencies (BTC, ETH, BNB, etc.)
Contract value	Bottom asset unit (0.1BTC represents the spot price of 0.1BTC)	The contract multiplier represents the value of the contract (a BTC contract represents $100)
Contract term	Perpetual contracts, quarterly contracts and second quarterly contracts	Perpetual contracts, quarterly contracts and second quarterly contracts
advantage	Unified mortgage assets, stable and intuitive pricing units, suitable for short markets	Cryptocurrency as collateral and clearing suitable for long markets

Binance Contract Teaching (Coin-Based Contract)

Preparations for opening contract trading:

1) Open a Binance account and complete KYC certification.

2) Before opening a Binance contract, you must complete the [suitability test] and answer 14 questions about contract trading. This test is mainly to improve users' awareness of risk.

3) If you want to make a U-based contract, you need to transfer from a "spot account" to a "contract account"; if you want to make a currency-based contract, you need to transfer from a "spot account" to a cryptocurrency such as BTC to a "contract account";

1. Binance currency standard contract trading teaching

The following will introduce the transaction process using a perpetual contract of a currency standard contract (BTCUSD CM).

Preparation: When trading coin standard contracts, you need to first purchase the corresponding cryptocurrency as margin. For example, when doing a Bitcoin contract, you need to first transfer BTC to the contract account as margin; when doing an Ether contract, you need to transfer ETH as margin.

Step 1: On the Binance website of Binance, select "Contract Coin Standard Perpetual Contract - BTCUSD CM".

Step 2: Choose the leverage and margin mode (full position/per position). It is recommended that novices entering the market place the leverage below 10 times (set to 5X here). The author generally adopts the "full position margin mode" and strictly sets stop loss.

The full-position margin model is to use all funds in the contract account as margin; the position-by-position margin model is to use a certain amount of margin to allocate to the position, and the maximum loss of margin under the position is to lose only the margin under the position.

Coin Capital Contract (BTCUSD CM), the value of a contract is 100USD. If you think the price of Bitcoin will rise, and you can place 10 long orders, you will be long for Bitcoin with a value of 1000USD. You can place an order by limiting prices or market prices.

Step 3: After the order is completed, it will be displayed in the [Part], the opening price, forced flat price, margin ratio, unrealized profit and loss, etc.

The most important one is [forced flat price]. The closer the forced flat price is to the current price, the easier it is to overturn the position. The forced flat price shown in the figure is 1917.7, which means that when the price of Bitcoin falls to 1917.7, it will be forced to close the position. Of course, the chance of falling to this price is very low.

Coin standard contracts are particularly suitable for rising markets. The expected return/loss of long is BTC . After realizing the profit, you can sell it at a higher price in the spot market to lock in profits!

3. Binance Contract Teaching (U-Based Contract)

The operation process of U-primary contracts and currency-primary contracts is basically the same. The difference is that the U-primary contract account needs to be transferred to USDT as margin, and the profit and loss are also liquidated by USDT. You must first transfer USDT as a margin.

Step 1: Find [Contract]-[U-Based Contract]-[BTCUSD Perpetual] on the Binance official website page. The number of opening positions is denominated in Bitcoin, as shown in the figure below. Shorting of 0.01BTC requires approximately 85.39 USDT margin.

Step 2: You can use the same method to long contract currencies such as ETH and ETC, and all use the USDT in the contract account as margin. Pay attention to margin ratio and forced flat price.

Features of U-standard contracts:

• Since all contract currencies can be used as margin, the price is intuitive and easy to operate
• U-standard contracts are particularly suitable for falling markets. The expected return of short selling is USDT USDT, and the profit-making subject matter will not lose money due to the market decline!

For Binance U-Based Contract Trading Teaching, please refer to: Short Bitcoin Teaching - How to earn coins from shorts in a cryptocurrency bear market? Read this article is enough

5. Binance contract information query tool

In the contract-information-market menu of Binance website, you can query various data such as contract position volume, contract market long and short ratio, so that investors can observe the current market conditions.

Position: You can check the changes in Binance user contract holdings for 5 minutes to 24 hours.

The proportion of net long and short accounts of large holdings: Large investors refer to the top 20% of users with margin balance. Only remember one account once.

The proportion of accounts with multiple positions = number of large accounts with multiple positions/total number of large accounts with large positions

The proportion of short positions accounts = number of large short positions/total large positions

Ratio of long and short accounts = ratio of long accounts/proportion of short accounts

Quick summary:

The mortgage and settlement of the [U-standard Contract] are carried out in USDT, a US dollar stablecoin. Users only need to prepare USDT to start the transaction. Most investors like this type of contract. It is recommended that newcomers can start from the U-based position.

✅U standard contract:	❌Coin Standard Contract:
● Use USDT as margin, and profit and loss are cleared by USDT ● Shared margin can be used in different contracts ● The quotation unit is intuitive, convenient for trading multi-currency contracts, suitable for newcomers	● Use cryptocurrency as collateral and clearing ● Different contracts need to deposit different currencies as margin ● Convenient to trade single currency contracts

Enter Binance official website

Risk warning: Leveraged margin trading is high risk and may not be suitable for all investors. Before deciding to participate in contract trading, you should carefully consider your investment goals, experience level and risk tolerance.

Summarize

In general, currency standard contracts and U standard contracts are two main forms of cryptocurrency derivatives trading, each with their own characteristics. They not only reflect the innovation of the cryptocurrency market, but also provide investors with a diverse trading tool. With the continuous maturity of the cryptocurrency ecosystem, these trading tools are expected to be further improved, providing investors with a safer and more efficient trading environment.

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