Navigating the world of cryptocurrency derivatives can seem complex, but understanding the different types of futures contracts is a crucial step for any serious trader. These financial instruments allow you to speculate on the future price of a cryptocurrency without owning the asset itself. However, not all futures contracts are created equal. They differ in settlement methods, expiration dates, and the assets used for collateral.

This guide will break down the primary types of crypto futures contracts available on platforms like XT. We will explore perpetual, delivery, USDT-margined, and COIN-margined contracts. By the end, you will have a clear understanding of how each one works, their key differences, and how to choose the right one for your trading approach.

How Crypto Futures Contracts Are Classified

Crypto futures contracts can be sorted into distinct categories based on two main characteristics: their expiration and their margin type. Understanding this classification is the first step to mastering futures trading.

First, let’s look at classification by expiration date. This determines how and when a contract is settled.

• Perpetual Futures: These contracts have no set expiration or settlement date. Traders can hold a position for as long as they wish, provided they maintain sufficient margin.
• Delivery (Fixed-Expiry) Futures: These are more traditional contracts with a specific expiration date. On this date, the contract is settled, and all open positions are closed.

Second, we classify contracts by the asset used for margin and settlement. This is known as the margin type.

• USDT-Margined (Linear) Contracts: These use a stablecoin, most commonly USDT, as the margin. Profits and losses (P&L) are also calculated and settled in this stablecoin.
• COIN-Margined (Inverse) Contracts: These use the underlying cryptocurrency of the contract (e.g., BTC for a BTC futures contract) as margin. P&L is calculated and settled in that same cryptocurrency.

Platforms like XT offer a variety of these contract types, giving traders the flexibility to choose the structure that best fits their objectives.

Perpetual Futures Contracts Explained

Perpetual futures are a unique innovation that originated in the crypto market. Unlike traditional futures, they do not have an expiration date. This key feature allows traders to hold their long or short positions indefinitely, making them highly popular for long-term speculation.

Because these contracts never expire, they need a mechanism to ensure the contract price stays closely aligned with the underlying asset’s spot price. This is achieved through a “funding rate.” The funding rate is a periodic payment exchanged between traders holding long and short positions.

If the perpetual contract price is trading higher than the spot price, the funding rate will be positive. In this case, traders holding long positions pay a small fee to those holding short positions. This incentivizes traders to open short positions or close long ones, helping to pull the contract price down toward the spot price.

Conversely, if the contract price is below the spot price, the funding rate becomes negative. Now, short position holders pay the longs. This encourages traders to go long, pushing the contract price up. These payments typically occur every few hours, ensuring the contract remains tethered to the spot market. At XT, the funding rate mechanism operates seamlessly in the background, providing a smooth trading experience for our users.

Delivery (Fixed-Expiry) Futures Contracts

Delivery futures, often called fixed-expiry contracts, operate much like futures in traditional financial markets. Each contract has a predetermined expiration or “delivery” date. Common expiry cycles include weekly, bi-weekly, quarterly, and bi-annually.

When you trade a delivery contract, you are agreeing to a price for a cryptocurrency to be settled on that future date. As the expiration date approaches, the contract’s price naturally converges with the asset’s spot price. On the settlement date, all open positions for that contract are automatically closed at the final settlement price, which is typically derived from an average of the spot price.

The main difference from perpetual contracts is the absence of a funding rate mechanism. Since the contract has a finite lifespan, price convergence is guaranteed by the fixed settlement date. Traders using delivery contracts must be mindful of the expiration date, as their positions will be closed whether they are in profit or loss. This makes them suitable for traders who have a specific price target and timeframe in mind. XT offers a range of delivery contracts, allowing traders to execute time-bound market views.

USDT-Margined Futures Contracts

USDT-margined contracts, also known as linear futures, are contracts that use a stablecoin—most commonly Tether (USDT)—as the collateral or margin. When you trade these contracts, you deposit USDT into your futures wallet to open and maintain positions.

The most significant advantage of this contract type is its simplicity and predictability. Since your margin and settlement are in a stablecoin, calculating your profit and loss (P&L) is straightforward. If you make a profit of 100 USDT, your equity increases by exactly 100 USDT. This removes the volatility of the margin asset itself from your P&L equation.

For example, if you open a long position on a BTC/USDT futures contract and the price of BTC goes up, your profits are paid out in USDT. If the price goes down, your losses are deducted from your USDT margin. The value of your collateral (USDT) remains stable regardless of what happens to the price of Bitcoin or any other cryptocurrency. This makes USDT-margined contracts a popular choice for traders who want to secure their profits in a stable asset and simplify their performance tracking. On XT, you can trade a wide array of USDT-margined perpetual contracts for dozens of different cryptocurrencies.

COIN-Margined Futures Contracts

COIN-margined contracts, also referred to as inverse futures, use the underlying cryptocurrency as margin. For instance, to trade an ETH/USD futures contract, you must deposit ETH as collateral. All profits and losses are also calculated and settled in that same base cryptocurrency (in this case, ETH).

This structure is particularly appealing to long-term holders or “hodlers” of a cryptocurrency. By using their existing crypto holdings as margin, they can trade futures without needing to convert their assets into a stablecoin. This allows them to potentially increase their holdings of that specific crypto. If you are bullish on BTC and trade a BTC-margined contract, your profits will be paid in BTC. As the price of BTC rises, not only does your position gain value, but the value of your profits (which are denominated in BTC) also increases. This creates a compounding effect.

However, this can also work against you. If you are in a short position and the asset’s price goes up, you incur a loss. Because your margin is also in that same appreciating asset, the real value of your loss is magnified. This non-linear P&L calculation makes COIN-margined contracts more complex to manage but potentially more rewarding for crypto-native investors and miners who want to hedge or grow their crypto stacks.

Comparing the Four Contract Types

To help you decide which contract is best for you, let’s summarize the key differences in a simple comparison.

Feature	Perpetual Futures	Delivery Futures	USDT-Margined	COIN-Margined
Expiration Date	None	Fixed (e.g., quarterly)	Can be perpetual or delivery	Can be perpetual or delivery
Price Anchor	Funding Rate	Expiry Date Convergence	Depends on expiry type	Depends on expiry type
Margin Asset	USDT or Coin	USDT or Coin	USDT (or other stablecoin)	Base Cryptocurrency (e.g., BTC, ETH)
P&L Calculation	Linear (if USDT-margined) or Non-linear (if COIN-margined)	Linear (if USDT-margined) or Non-linear (if COIN-margined)	Linear and straightforward	Non-linear and complex
Best For	Traders who want flexibility without a time limit.	Traders with a time-specific price outlook.	Traders who prefer P&L stability and easy calculation.	Crypto holders who want to increase their crypto stack.

As the table shows, the choice between perpetual and delivery depends on your time horizon, while the choice between USDT-margined and COIN-margined depends on your preferred collateral and P&L currency.

How Crypto Exchanges Support Multiple Futures Contract Types

Leading crypto exchanges like XT understand that a one-size-fits-all approach does not work for derivatives trading. To cater to a diverse user base with different goals, exchanges provide a comprehensive suite of futures products.

On the XT platform, this is organized through a user-friendly interface that clearly distinguishes between different markets. Traders can easily navigate between sections for:

• USDT-M Futures: This section lists all perpetual and delivery contracts that are margined and settled in USDT. It’s the most popular and extensive category.
• COIN-M Futures: Here, traders find contracts margined and settled in cryptocurrencies like BTC and ETH.

By offering both linear (USDT-M) and inverse (COIN-M) contracts, exchanges empower traders to choose their preferred method of collateralization. Furthermore, providing both perpetual and fixed-expiry contracts gives traders control over their position’s duration. This multi-product support ensures that whether you are a short-term speculator, a long-term investor, or a miner looking to hedge, you can find a contract that aligns with your specific needs on a single, unified platform.

Several misconceptions can deter newcomers from exploring crypto futures. Let’s clarify some of the most common ones.

Misunderstanding 1: “Futures trading is the same as spot trading.” This is incorrect. In spot trading, you buy or sell the actual cryptocurrency for immediate delivery. In futures trading, you are buying or selling a contract that represents the asset, not the asset itself. You are speculating on its future price movement without taking ownership of the coins.

Misunderstanding 2: “You can only make money if the market goes up.” This is a major misconception. Futures contracts allow you to profit from both rising (long positions) and falling (short positions) markets. If you believe the price of a cryptocurrency will decrease, you can open a short position to profit from the decline.

Misunderstanding 3: “Perpetual futures are risk-free because they don’t expire.” While the lack of an expiration date offers flexibility, perpetual futures are not without risk. The funding rate can work against your position, creating a steady cost to hold it. More importantly, all futures positions are subject to liquidation risk if the market moves against you and your margin is depleted.

Misunderstanding 4: “COIN-margined contracts are always better for bulls.” While it’s true that COIN-margined contracts can compound gains when an asset’s price rises, they also compound the risk. If you are in a long position and the price falls, your losses are in a depreciating asset, and the value of your collateral also drops. This dual impact can lead to faster liquidations compared to a stablecoin-margined contract.

FAQ

Q1: Can I trade futures contracts on XT with assets other than USDT? Yes. XT supports both USDT-margined and COIN-margined contracts. This means you can use USDT as collateral for a wide range of futures, or you can use cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) for COIN-M contracts.

Q2: What happens if I hold a delivery futures contract until expiration? On the expiration date, your position will be automatically closed by the exchange at the final settlement price. Your profit or loss will be calculated based on the difference between your entry price and this settlement price, and the funds will be credited to or debited from your futures wallet.

Q3: How is the funding rate for perpetual futures calculated? The funding rate is determined by the difference between the perpetual contract’s price and the underlying asset’s spot price. It also includes an interest rate component. The exact formula can vary slightly between exchanges, but the principle remains the same: it incentivizes the contract price to track the spot price.

Q4: Do I need to own Bitcoin to trade a BTC futures contract? Not necessarily. If you trade a USDT-margined BTC futures contract (like BTC/USDT), you only need USDT as collateral. You would only need to own Bitcoin if you choose to trade a COIN-margined BTC futures contract.

Conclusion: Choosing the Right Crypto Futures Contract

Selecting the right crypto futures contract is not about finding the “best” one, but about finding the one that best suits your goals, risk tolerance, and trading style.

• Choose Perpetual Futures if you value flexibility and want to hold a position without a fixed deadline.
• Choose Delivery Futures if you have a specific timeframe for your market prediction and want to avoid funding fees.
• Choose USDT-Margined Contracts if you are new to futures or prefer a simple, linear P&L structure with profits locked in a stable asset.
• Choose COIN-Margined Contracts if you are a long-term holder of a cryptocurrency and your goal is to accumulate more of that specific coin.

By understanding the fundamental mechanics of these four contract types, you can make more informed decisions. At XT, we provide a robust and secure platform for you to explore all these options. We encourage you to start with a clear plan, understand the characteristics of the contract you are trading, and engage with the market in a way that aligns with your financial objectives.

About XT.COM

Founded in 2018, XT.COM is a leading global digital asset trading platform, now serving over 12 million registered users across more than 200 countries and regions, with an ecosystem traffic exceeding 40 million. XT.COM crypto exchange supports 1,300+ high-quality tokens and 1,300+ trading pairs, offering a wide range of trading options, including spot trading, margin trading, and futures trading, along with a secure and reliable RWA (Real World Assets) marketplace. Guided by the vision “Xplore Crypto, Trade with Trust,” our platform strives to provide a secure, trusted, and intuitive trading experience.

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