The vast majority of investors must also want to ask. To say which is better between leverage and contracts, we must first understand the concepts of the two. Leverage trading is to multiply the principal and make larger investments with small funds. With a small and broad, the income is doubled. Due to the large fluctuations in the price of digital assets, some investors may experience asset losses. The contract is judged according to the price trend of the digital currency. In short, the investor invests in the price trend of Bitcoin. So which one is more risky, leverage or contract?
Do currency speculation generally use leverage or contracts?
First of all, let’s explain how leverage is operated. Leverage is a common financial tool, that is, through the margin system, amplifying assets for investment, using leverage, risks and returns will be amplified simultaneously, because investors’ profit and loss after using leverage is not based on The size of the invested margin is calculated according to the enlarged amount of funds.
For example, when the BTC price is $5,000/piece, Xiao Ming uses 1 BTC as a margin and uses 10 times leverage to obtain a contract worth 10 BTC (that is, 500 contracts with a face value of $100/contract).
If the price of BTC rises by 1% from $5,000/piece to $5,050/piece, the profit of this contract will be 0.099 BTC.
Xiao Ming used 10x leverage and made $500 in the contract market with $5,000.
If it is 1x leverage, Xiao Ming also uses 1 BTC as a margin to obtain a contract worth 1 BTC (that is, 50 contracts with a face value of $100/contract). When BTC rises to $5,050/piece, Xiaoming The profit is 0.0099 BTC (that is, $50 earned).
Comparing the use of 10x leverage and 1x leverage, Xiao Ming’s actual income is 10 times different.
It should be noted that with leverage, the gain is doubled, and the loss is also doubled. Through the margin system, investors can complete large transactions with a small capital cost.
The principle of contract trading is the same as that of futures trading. Two-way trading can be done both long and short. Before there is no transaction, the two parties should submit matters such as digital currency to the agreement, and then trade at the agreed time. Regardless of whether the digital currency has risen or fallen at the trading time, and whether the result is a profit or a loss, the transaction must be carried out according to the previous agreement.
The following points should be noted:
- Remember not to go to the full warehouse like playing spot
- The transaction is more flexible, you can buy up or down, and you can close the position at any time with profit
- The operation strategy is more important. Due to the addition of leverage, the relative volatility is relatively large, which is suitable for short-term operations (the speculative attribute is increased, the investment attribute is reduced, and it is not suitable for long-term holding)
- There are risks in the currency market. Be cautious when entering the market. Spot transactions such as the stock market and contract transactions such as futures should pay more attention to risk control.
So from these perspectives, Bitcoin leverage is more risky than contracts. Suppose you go to the gambling table with 100 yuan and bet on Ethereum. When Ethereum rises by 10%, your dollar will be It became 110, 10% of the income. At this time, someone tells you that there is a leverage service that can help you turn your bet into 1,000 yuan, which is 10 times the leverage. At this point, when Ethereum rose 10%, 1,000 yuan became 1,100 yuan. You repaid the 900 yuan you borrowed, and you have 200 yuan left, 100 yuan in principal, and 100 yuan in profit, realizing a 100% return. However, when you don’t bet right, and the ether spinning does not rise but falls, and falls by 10%, then your 1,000 yuan bet will become 900 yuan, and the 900 yuan is borrowed, and your principal at this time will also be Gone.