This is a guide to trading recently launched USDT-margined perpetual swaps on the Huobi cryptocurrency exchange.
The cryptocurrency market is surging as new investors take up positions in the innovative field. As prices and value go up, virtual asset service providers such as crypto exchanges are building more financial instruments and products to capture the interest of crypto traders.
Founded in 2013, Huobi crypto exchange is one of the pioneers in offering a wide range of instruments to its users. The exchange has expanded its crypto-focused financial products in the past few years – adding to its vast offerings of digital asset spot trading. Derivative products in the crypto space have ballooned in tandem with the market and Huobi has been right up there aiming to add as many of these products as possible. Huobi Futures is the derivatives platform of Huobi Group.
Ranging from futures, perpetual swaps, and options, Huobi Futures has played its role to make it easier for traders to take up positions betting on the future price. One particular derivative that is witnessing massive adoption across the crypto markets is the perpetual swap – which allows traders to bet on the future price of an asset without a predetermined expiration date.
Difference between a USDT-Margined and Coin-Margined perpetual swaps
As explained above, a perpetual swap contract is like a futures contract but allows the user to buy or sell the asset at any time without an expiry. In this class of derivatives, users have an option to take up USDT-margined or Coin-margined perpetual swaps – both offering different pros and cons.
So how does the USDT-margined and coin-margined perpetual swaps differ?
A USDT-margined perpetual swap is a linear contract whereby the margin is stored in USDT stablecoin. On the flip side, a coin-margined perpetual swap (also known as inverse perpetual swap) stores the margin in the selected cryptocurrency e.g. Bitcoin (BTC), Ether (ETH), XRP, etc.
In comparison to coin-margined swaps, USDT-margined swaps are better for the following reasons:
- Allows a simpler and more direct calculation of the profit and loss from a perpetual swap contract, unlike the coin-margined swaps. USDT-margined perpetual swaps P&L can be shown on a linear curve, and is clear at a glance in USDT.
- Secondly, in inverse/coin-margined perpetual swaps, the margin is based on the underlying cryptocurrency such as BTC/ETH/XRP/LTC/ BCH, etc. which are very volatile in comparison with USDT. USDT-margined perpetual swaps uses stablecoin as margin and thus, traders do not have to hedge their position to avoid the risk of holding the cryptocurrency.
Huobi USDT-Margined Perpetual Swaps
Huobi Futures announced the launch of the USDT-margined swaps in mid-October allowing you to bet on the future price of crypto assets. Trading USDT-margined perpetual swaps enables you to long or short an asset if you think the price is going up or down respectively.
“The USDT-margined swaps are settled every 8 hours and the realized PnL and unrealized PnL will be transferred to the user’s account balance after the settlement,” Huobi’s launch statement reads.
USDT-margined perpetual swaps offer you 1x to 125x leverage on your trades allowing you to trade up to 125 times the amount in your account. However, remember higher leverage puts you at a higher risk of being liquidated. Trade leveraged positions with caution!
Currently Huobi offers 15 trading pairs on its USDT-margined swaps including BTC, ETH, BCH, BSV, EOS, XRP, LTC,TRX, LINK, DOT, FIL, BNB, YFI, YFII, and Uniswap’s native token, UNI.
How to place an order on Huobi USDT-Margined Swaps
After learning the intricacies of Huobi’s USDT-margined perpetual swaps, in this section, we explain a step by step guide on how to trade these stablecoin margined positions.
Step by Step
1. Opening a Huobi account
Before starting your journey in USDT-margined swaps trading, you need to have a registered and verified account on Huobi Futures.
- On the official Huobi exchange website, go to the “Sign Up” page.
- Enter your details on the resulting page including email/phone number, nationality, name, and password.
- Agree to the “User Agreement”.
- Click “Sign Up”.
Once signed up, you will have to complete the ID verification requiring you to input your names, a government-issued passport, driving license, or ID number, and upload a picture of it.
Then Visit “https://futures.huobi.fm” and click “USDT-margined Swaps”. Log in to your Huobi account and open USDT-margined swaps.
- Allows enabling Two-Factor Authentication (2FA) for additional security.
- Huobi also implements additional security measures such as email verification, a designated fund password to ensure fiat asset security and phone verification, etc.
2. How to Deposit USDT funds to your account
- Log in to your Huobi trading account.
- On the top right-hand side, click on “Balances” and select the USDT token.
- Check your USDT deposit address and send USDT to this address. You may choose to copy the deposit address or scan the QR Code.
NOTE: USDT has multiple chains that support it including OMNI, ERC20, and TRC20. Be careful to select the correct blockchain before transferring your tokens.
- Once copied, head over to your USDT-filled wallet and withdraw to this copied address.
Read more on depositing cryptocurrencies on the Huobi Global exchange.
3. Transferring USDT from spot wallet to derivatives wallet
Once you deposit USDT to your “Exchange Account”, the next step is to transfer the tokens to your “Derivatives Account”.
- Go to the “Balances” tab. Choose “Derivatives Account”
- Choose swaps that you want to trade and select the “Transfer” option.
- Click “Transfer”, select transfer from “Exchange Account” to “Derivatives Account” and enter the amount you wish to transfer.
- Click “Confirm” to transfer the asset.
Types of orders on Huobi Futures
You can take up a position on USDT-margined perpetual swaps using a direct market buy or an order. There are multiple orders available on Huobi Futures including:
Limit order: Limit order specifies the highest price you wish to buy an asset and the lowest price you are willing to sell a specific asset.
Trigger order: This order allows you to set a trigger price, order price and quantity in advance. When the latest price reaches the trigger price, the system will place an order by using the price and quantity set in advance just like limit order.
Best Bid Offer, also known as BBO: On this order, you are only expected to set the quantity of assets wished to purchase, the system will take the latest price of the opponent at the moment receiving this order to place the order.
Optimal N order: You can also place an orders based on BBO prices within the optimal N. This allows you to mitigate your losses in case the market fluctuates violently.
Flash close: (From Huobi site) Flash Close is a function that would help users to place an order by using the prices within optimal 20 based on the BBO prices. And the unfilled parts will convert to Limit Order automatically.
How to start trading on Huobi’s USDT-Margined Swaps
Before starting off on how to open your USDT-margined swaps positions, you need to understand some key terms:
- Funding rate: This is the fee paid between buyers and sellers at settlement after every 8 hours. If the rate is negative, the shorts have to pay the longs and if positive, the longs will pay the shorts.
- Position margin: This is the amount of margin that is allocated to all your open positions. It is calculated as the entry value of all the contracts you hold, divided by the selected leverage, plus unrealised profit and loss.
- Order margin: The minimum amount of equity required to retain your open orders. It is calculated as the value of all open orders divided by the selected leverage.
Step by step trading USDT margin swaps
- Go to the Huobi Global official website and log in to your account.
- On the top bar, click on “Derivatives” and select “USDT-margined swaps”.
- On the resulting “Trading” page, select the cryptocurrency you wish to trade.
- Place an order by selecting the “Type of Order” and filling in the price and quantity wished.
- “Open Long” if you think price will go up; “Open short” if you think the price will go down.
As seen above, trading USDT-margined perpetual swaps have their advantages over coin-margined swaps. Volatility risk is done away with while offering a direct and simple linear method to calculate profits. Huobi is a pioneer in USDT-margined trades, offering you a cheap and direct platform to complete your stablecoin derivatives trades.
(Photos from Huobi Global)