What Is Coin-Margined (COIN-M) Futures Trading?

Is this your first time trading futures? You're probably feeling a bit anxious. For successful trading, the most important thing is to properly understand the product you're using.

In this post, we'll take a detailed look at coin-margined futures (COIN-M Futures), which use the coins you hold as margin. If you spare just 5 minutes and read to the end, you should come away with a clear grasp of the concept.

The Concept of Futures Trading

We'll look at "coin-margined futures" by breaking it down into "coin," "margin," and "futures." The first concept you need to understand is futures.

Futures means buying and selling a "contract" for a specific cryptocurrency at a set price at a specific point in the future. This concept applies not only to cryptocurrency but also to commodities, currencies, and many other derivatives in the financial markets.

The key word here is "contract." In other words, unlike spot trading, in futures trading the buyer and seller don't exchange the asset directly; instead, they exchange a contract promising to exchange it. Then, when the contract's settlement date arrives, the parties to the contract settle it with the actual asset.

So, futures trading refers to contract trading in which a buyer and seller agree to exchange a spot asset at a future point in time.

Crypto & Blockchain 101The Difference Between Spot Trading and Futures Trading2 min read

The Difference Between Coin-Margined and USDT-Margined

Now that we understand futures trading, let's look at the difference between "COIN-margined" futures and "USDT-margined" futures.

The key difference between COIN-margined and USDT-margined is which asset you put up as margin. With COIN-margined, you put up the coins you hold as margin, and with USDT-margined, you put up USDT as margin.

So what is margin? Remember that in futures trading, you trade contracts. The two parties must not only promise to fulfill the contract but also prepare a deposit for it. This deposit is the margin (also called a security deposit or collateral).

By now, you should understand the difference between coin-margined and USDT-margined. If you'd like a more detailed explanation, please refer to The Difference Between Coin-Margined and USDS-Margined.

Margin and Liquidation

Now we fully understand what "coin-margined futures" trading means. It refers to a futures contract trading product in which you put up coins as margin (a security deposit).

Futures contracts that use margin usually support leverage, which lets you trade with less capital than in spot trading. However, even then, you'll need enough capacity (margin) to fulfill a leveraged contract trade. That's why, in leveraged futures trading, liquidation, where your margin is forfeited, can sometimes occur.

• The Difference Between Isolated Margin and Cross Margin
• What Leverage Means and How to Use It
• Liquidation on Futures Exchanges and Why You Must Avoid It

Wrapping Up

That covers coin-margined futures contract trading, where you trade by putting up coins as margin. Futures trading is based on contracts to settle a spot asset at a future price, and you put up margin as proof of creditworthiness for these contracts. You can use leverage to increase the size of a contract, but in that case you need to watch out for liquidation risk.