Newbie's Guide to Crypto World Contracts | Core Knowledge to Learn from Scratch

Are you a Newbie who has just entered the crypto world and feel confused about contract trading? Don't worry, this article will popularize the basic knowledge of contracts in the crypto world for you, helping you to easily get started～

1. What is a crypto world contract
A contract, also known as a futures (English FUTURE). In the crypto world, a contract transaction is like both parties signing an agreement. The contract is measured in "lots", with the minimum trading unit being 1 lot.
A contract can be newly signed, for example, if you sign a new contract with someone else, the total number of contracts in the market will increase by 1; it may also be the case that someone transfers an existing contract to you, in which case the total number of contracts remains unchanged.

2. The difference between contracts and spot.
Spot trading is "cash on delivery", completed instantly; whereas in the crypto world contract trading, the parties are not trading the physical asset itself, but rather their predictions of the future price of the asset.
For example: one person believes that the price of Bitcoin will rise in the future, while another person believes it will fall, and they can bet against each other by signing a contract. The contract is essentially a zero-sum game, where one party's profit equals the other party's loss.
The biggest difference between contracts and spot trading is that contracts support leverage and short selling. Leverage is used to adjust the margin ratio, and the leverage multiples for different contracts are set by the exchange based on the volatility and liquidity of the coins.

3. The Principle of Leverage
Assuming the current price of Bitcoin is 50000 yuan, the margin for a contract is 50 yuan. If you choose 100x leverage, the value of this contract would be 5000 yuan. At this point, if you only have 50 yuan in your wallet and the price drops by 1%, you will face the risk of liquidation.
However, if there are 2500 in the wallet and all of it is used as margin, the actual leverage becomes 2 times instead of 100 times. Therefore, the actual size of the leverage not only depends on the chosen leverage multiplier but also relates to the amount of funds in the account.

Just getting into the crypto world contracts, be sure to operate cautiously, learn more, and understand relevant knowledge~ If anyone has any questions, feel free to leave a message for discussion and progress together. #BTC# #ETH#