What are crypto-margined vs USDT-margined contracts on OKX?

Understanding Margin in Derivatives Trading on OKX

In derivatives trading on platforms like OKX, the term 'margin' refers to the collateral required to open and maintain a leveraged position. This collateral ensures that traders can cover potential losses on their trades. The type of asset used as margin defines the category of the contract. On OKX, two primary margin types exist: crypto-margined contracts and USDT-margined contracts. Each functions differently in terms of collateral, profit/loss calculation, and settlement. Understanding these differences is essential for managing risk and optimizing trading strategies.

The choice between margin types impacts how your gains and losses are realized. With crypto-margined contracts, the margin is posted in a cryptocurrency such as BTC or ETH, and profits or losses are also settled in that same cryptocurrency. In contrast, USDT-margined contracts use Tether (USDT) as the base margin asset, and P&L is calculated and settled in stablecoin terms, offering a more predictable valuation.

How Crypto-Margined Contracts Work

Crypto-margined contracts are also known as inverse contracts because they are quoted and settled in a cryptocurrency rather than a fiat or stablecoin. For example, a BTC/USD perpetual contract that is crypto-margined requires BTC as collateral. When you open a long or short position, your margin, maintenance requirements, and liquidation price are all calculated in BTC.

• The contract size is denominated in USD, but the margin is in BTC.
• Profits and losses are paid out in BTC, meaning your BTC balance increases or decreases based on trade performance.
• If the price of BTC rises significantly while you hold a short position, your losses in BTC terms may be amplified due to the inverse nature.
• Liquidation occurs when your BTC-denominated margin falls below the maintenance threshold.

This structure introduces volatility in your margin value due to the fluctuating price of the underlying cryptocurrency. A sharp move in BTC price can rapidly affect your margin ratio even if the USD value of your position hasn’t changed drastically.

How USDT-Margined Contracts Work

USDT-margined contracts are linear contracts that use USDT as the margin and settlement asset. These contracts are quoted in USDT and the underlying asset (e.g., BTC/USDT). They are designed to provide more stability in margin management because USDT is a stablecoin pegged to the US dollar.

• Traders deposit USDT to open positions in assets like BTC, ETH, or SOL.
• The profit and loss are calculated and settled directly in USDT, making it easier to track performance in dollar-equivalent terms.
• Both long and short positions are funded and settled in USDT, eliminating exposure to the volatility of the base cryptocurrency in terms of margin.
• Liquidation levels are calculated based on USDT value, which remains relatively stable.

Because USDT maintains a near-constant value, traders can better predict their risk exposure. This makes USDT-margined contracts especially popular among traders who want to speculate on price movements without worrying about the margin asset itself fluctuating in value.

Key Differences in Risk and Exposure

The primary distinction between the two types lies in risk exposure to the margin asset. With crypto-margined contracts, your margin asset is subject to price swings. For example, if you use ETH as margin and ETH’s price drops sharply, your effective margin decreases in USD terms, increasing the chance of liquidation even if the trade direction is correct.

• Crypto-margined: Margin value fluctuates with crypto price; P&L in crypto.
• USDT-margined: Margin value stable; P&L in stablecoin.
• Funding rates are paid in the respective margin asset: BTC for inverse, USDT for linear.
• Leverage availability may differ between contract types on OKX.

Traders bullish on a cryptocurrency might prefer using it as margin in inverse contracts, as profits in that crypto could benefit from future price appreciation. Conversely, traders seeking predictable risk management often choose USDT-margined contracts to avoid volatility in their collateral.

Step-by-Step Guide to Choosing and Using Contracts on OKX

To trade either contract type on OKX, follow these steps carefully:

• Log in to your OKX account and navigate to the Derivatives section.
• Select Perpetual Contracts or Futures, depending on your preference.
• Choose between USDⓈ-M Futures (USDT-margined) and Coin-M Futures (crypto-margined).
• Search for the trading pair, such as BTC-USD-SWAP (crypto-margined) or BTC-USDT-SWAP (USDT-margined).
• Set your leverage using the slider or input field—adjust according to your risk tolerance.
• Deposit the required margin: BTC for Coin-M, USDT for USDⓈ-M.
• Place your order using limit, market, or other available order types.
• Monitor your position margin, liquidation price, and unrealized P&L in real time.

Ensure your wallet holds sufficient margin in the correct asset. Switching between margin types requires transferring funds between your funding wallet and trading account in the specific cryptocurrency.

When to Use Each Contract Type

Traders focused on short-term speculation with stable risk parameters typically benefit from USDT-margined contracts. Since P&L is in stablecoin, it's easier to calculate returns and manage portfolio value. This is ideal for strategies involving tight stop-losses or algorithmic trading systems.

Holders of large amounts of a specific cryptocurrency, such as BTC or ETH, may prefer crypto-margined contracts to avoid converting their holdings into stablecoins. By using their existing crypto as margin, they maintain exposure to potential price appreciation while still engaging in leveraged trading.

Institutional traders or those hedging spot positions might use inverse contracts to precisely offset exposure. For example, a miner holding BTC can short BTC/USD inverse futures to hedge against price drops, keeping all transactions within the BTC ecosystem.

Frequently Asked Questions

Can I switch from crypto-margined to USDT-margined positions on OKX?Yes, you can hold both types of contracts simultaneously, but you cannot convert one position type into another directly. You must close the existing position and open a new one under the desired margin type. Ensure your account holds the correct margin asset before initiating the new trade.

Is leverage the same for both contract types on OKX?Leverage ranges vary between crypto-margined and USDT-margined contracts. For example, BTC/USD-SWAP (crypto-margined) may offer up to 100x leverage, while BTC/USDT-SWAP (USDT-margined) could allow up to 125x. Check the specific contract details on the trading interface for exact limits.

Do funding rates differ between the two types?Yes, funding rates are determined by market demand and are paid in the margin asset. For crypto-margined contracts, funding is paid in BTC or ETH. For USDT-margined contracts, it is paid in USDT. The rate itself depends on the price difference between perpetual and spot markets.

What happens if my USDT-margined position gets liquidated?Upon liquidation, OKX automatically closes your position using a liquidation engine. Any remaining margin after covering losses is returned to your account. If the insurance fund is used, a deleveraging mechanism (ADL) may occur, impacting other traders’ positions in extreme cases.