Lesson 01 · 5 min
Three different ways to bet on a price
Owning the coin, borrowing to own more, and trading a contract are not the same click.
People say 'I traded bitcoin' and mean three different things. The picture below is the whole course in one glance. Everything later is a detail on one of these columns.
You own it
Spot
Cash leaves. The coin arrives. A 10% move changes the coin about 10%. Nothing is liquidated.
Coinbase, Kraken, Binance, and MEXC all do this.
You borrowed
Spot margin
You borrow cash or coins and pay a carrying fee. The loan is the risk. Fail to cover it and the venue sells you out.
Kraken and Binance. Not Coinbase retail. Not MEXC.
You hold a ticket
Perpetual
Collateral stays as margin. The contract follows the coin. Funding passes between longs and shorts so the ticket stays near spot.
All four, but the clocks and the buttons differ.
Spot is ownership
You pay money, the coin arrives in your wallet. If the price rises 10%, your coin is worth about 10% more. Nobody liquidates you for holding it. You can still lose most of the money if the coin falls. Ownership is not safety. It is just a simpler kind of risk.
Spot margin is a loan
You borrow cash or coins so you can buy or sell more than you have. Someone is owed that loan back, plus a carrying fee. Kraken charges that fee as a rollover, often every four hours. Binance charges interest, often by the hour. Coinbase does not currently offer this retail product. MEXC does not either.
A perpetual is a ticket, not a coin
You post collateral. You receive a contract whose price follows the coin. You can bet up or bet down. You never have to take delivery of the coin, and the contract does not expire the way a normal futures month does. The thing that keeps the ticket honest is a payment between traders called funding.
In one sentence. Spot owns the coin. Margin borrows. A perpetual tracks the coin with other people's collateral on the other side.
What does a perpetual give you?