Can Bitcoin be profitable when it falls? How to conduct contract transactions

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What is a contract transaction?

Contract is the most common form of transaction contract in digital currency derivatives market. Digital asset contract transaction means that the buyer and the seller agree to trade an asset at a specified price at a certain time in the future.

In this way, investors can earn the gains from the rise of currency prices by buying long contracts or selling short contracts, and gain the gains from the rise and fall of "target" prices. For example, when you are bullish on BTC for a long time, the price increase of BTC will bring profit, and the decline will bring loss; On the other hand, when you are bearish on BTC and short, the price increase of BTC will bring losses, while the decline will bring profits. Therefore, when bitcoin falls, it also has the opportunity to gain income, and earn up-and-down income through contract trading.

In addition, using the contract as a trading tool and through hedging, we can avoid risks and earn profits stably through arbitrage model.

In addition to long and short two-way transactions, another major feature of contract transactions is that the principal can be amplified by leverage, and the principal can be amplified by how many times the leverage is. The existence of leverage makes the digital assets have higher investment risk, and then enlarges its income and risk. Compared with spot trading, contract trading is a higher risk investment behavior, and new users need to operate carefully to control risks after understanding the basic situation of contract trading.

Classification of contract transactions

Ouyi provides two kinds of contract products: perpetual contract and delivery contract according to whether there is an due delivery date.

In these two large modules, it can be subdivided into U-margin contract and currency-based margin contract according to the type of margin. U margin contract includes USDT margin contract and USDC margin contract.

1. Delivery contract

The delivery contract has a delivery date, which means that the two parties to the transaction agree to carry out the contract delivery and sale at a specified price at a specified time, that is, the delivery date. When the contract expires and has not been closed, regardless of the profitability brought by the contract, it will be closed according to the arithmetic average price of the last hour of the index price. At present, Ouyi provides delivery contracts in four delivery cycles: the current week, the next week, the current quarter and the next quarter.

2. perpetual contract

A perpetual contract has no delivery date and never expires. Since there is no due delivery date, perpetual contracts will anchor the contract price to the spot price through the "capital cost mechanism", so that the price difference between the spot of the underlying assets and perpetual contracts will return to reasonable expectations.

Capital cost = position value * current capital rate. (The current fund rate is determined according to the difference between the contract price and the spot index price in the last fund expense period)

If the current capital rate is positive, the bulls need to pay the capital fee to the bears; If the current capital rate is negative, the short bears need to pay the capital fee to the long ones. (Capital fees are charged by users, and the platform does not charge this fee. )

Ouyi's fund expenses are settled every 8 hours at 08:00, 16:00 and 24:00(HKT) every day. Only when the position is held at the above three moments, the user needs to pay or collect the capital fee. If the position is closed before the settlement time of the fund fee, it does not involve the payment or collection of the fund fee.

3. Currency standard contract

A small amount of money that needs to be paid at a certain rate according to the contract price as a financial guarantee for the performance of the contract is the contract deposit. The distinction of margin types allows users to freely choose the basic digital currency USDT/USDC as the margin or the currency corresponding to the currency pair as the margin when trading.

The currency standard margin contract is a contract with the underlying assets as the margin and the delivery and settlement unit. Its contract target is the dollar index of the currency (for example, the target of BTC contract is BTC dollar index), and the rules of contract face value: the face value of the contract is a certain dollar value, and BTC is 100USD;; The contract in other currencies such as ETH is 10USD.

The currency standard margin contract can be used as a hedging tool for the assets held, and it can also enjoy the increase in the value of the standard assets and the benefits of the contract when holding multiple positions.

4. U-standard contract

U-based contract (U-margin contract) is a contract type with U as the delivery and settlement unit. Users need to use the stable currency USDT/USDC as the collateral assets. As long as there is USDT/USDC in the account, they can conduct contract transactions in multiple currencies, and the profit and loss are settled by USDT/USDC.

Its contract target is the USDT/USDC index of the currency (for example, the target of BTC contract is BTCUSDT/BTCUSDC index), and the rules of contract face value: the face value of the contract is a certain number of encrypted assets, such as BTC is 0.001BTC and ETH is 0.001ETH.

Because only USDT/USDC is used as the margin, the margin can be flexibly allocated between contracts, and there is no need to worry about the depreciation risk of the underlying currency. And the calculation formula is more concise, which is convenient for users to calculate profits and losses.