---
title: 'Crypto Margin vs Futures Explained (Binance, Bybit etc)'
source: 'https://youtube.com/watch?v=gvDEkG386dw'
video_id: 'gvDEkG386dw'
date: 2026-08-05
duration_sec: 903
---

# Crypto Margin vs Futures Explained (Binance, Bybit etc)

> Source: [Crypto Margin vs Futures Explained (Binance, Bybit etc)](https://youtube.com/watch?v=gvDEkG386dw)

## Summary

This video explains the key differences between margin trading and futures trading on cryptocurrency exchanges like Binance, Bybit, and Kraken. It clarifies that margin trading involves borrowing funds to buy actual assets, while futures trading involves trading derivative contracts without owning the underlying asset. The video also covers leverage, funding rates, and practical examples of how each works.

### Key Points

- **Spot Market Basics** [00:13] — The spot market is where assets are physically exchanged. For example, you trade dollars for Bitcoin and own the Bitcoin.
- **Margin Trading Definition** [00:53] — Margin trading involves borrowing money from the exchange to trade in the spot market. You take a loan and pay interest on it.
- **Futures Trading Definition** [01:20] — Futures are derivative products. You don't own the underlying asset; you only open and close positions on the price, settling profits or losses.
- **Leverage Similarity** [02:15] — Both margin and futures allow leverage, meaning you can trade with more money than you have. However, the mechanics differ.
- **Fee Differences** [02:39] — Margin trading fees are spot trading fees (10-25 basis points), while futures fees are usually cheaper because you're trading paper.
- **Leverage Limits** [02:52] — Margin typically offers 2-10x leverage, while futures can offer up to 100x or more, depending on the platform.
- **Interest on Margin Loans** [03:19] — Margin loans accrue interest, which you must pay back. Futures do not involve borrowing money, so no interest is charged.
- **Funding Rate Explained** [04:11] — Funding rate is a mechanism in perpetual futures to keep the derivative price in line with the spot price. It is a fee paid between longs and shorts.
- **Key Difference Summary** [06:36] — Margin: borrow money, buy assets, pay interest. Futures: use cash as collateral, trade price movements, no asset ownership.
- **Margin Trade Example** [07:29] — With $15 cash and 2x leverage, you can trade $30. You buy $30 of Bitcoin, but owe $15 loan. If price drops, you risk liquidation.
- **Futures Trade Example** [11:32] — With $15 cash and 10x leverage, you can open a $150 trade. If price moves 10% against you, you lose $15 and get liquidated.
- **Final Comparison** [14:28] — Futures: no borrowing, just collateral for potential losses. Margin: loan to buy assets, must repay with interest.

### Conclusion

Understanding the difference between margin and futures is crucial for crypto traders. Margin involves borrowing to own assets, while futures are derivative trades with no ownership. Both carry risks, and leverage can amplify losses.

## Transcript

futures trading on crypto platforms. So, if you're using Binance, Bybit, OKX, uh Kraken, Coinbase, they're going to offer margin here, and then futures. What is the difference? What one should you use?
Depending where you live in the world and the financial regulations that you come under, you may be offered either margin trading or future trading or potentially both. So, let's go through what these are and, you know, why
they're different. So, firstly, if we go to trade, we'll go to the spot market. The spot market is the actual market for assets. So, this is where you physically exchange assets. If I've got dollars and I want to buy Bitcoin, I take my
dollars, I trade it for the Bitcoin, the assets physically change, and I now get the Bitcoin. So, that's my property now. This is the spot market right here. So, Bitcoin dollars. Now, margin, if you go to trade, margin,
market, but with margin, what you're doing is basically borrowing money from the exchange to trade with. So, let's say I've got $1,000 in my account, the exchange will lend me another $1,000.
So, now I have $2,000 to trade with. I'm trading in the spot market with borrowed money. And margin is simply how much you're getting lent by the exchange. So, you're taking a loan of cash
and you're trading in the spot market. With futures, this is completely different. This is a derivative product. So, what that means is that even though this looks like the spot market, cuz we've
got Bitcoin dollars here, nothing is physically changing hands. This is a synthetic derivative market. This product tracks the price of the underlying assets, Bitcoin dollars, almost one for one. You see here, this
is the same price. However, we aren't buying and selling any What we're doing is just simply opening and closing trades and figuring out what and close and that's it. It's a derivative product. We're not trading
the underlying assets. We never own the underlying assets. We are just taking positions on the price of the assets. So, it's completely different and you can take leverage in futures as well. That means you can trade with the market
with more size than you actually have in cash. All right, so leverage is the similarity between margin and futures. You can trade with more cash than you have, but with futures there is no trading of the assets. You're just
opening and closing trades and settling the balance either a profit or a loss. With margin, you are borrowing money and literally buying the assets with borrowed money. So, with margin the trading fees are the spot trading fees
around 10 basis points, maybe up to 25 basis points. With futures, you usually get much cheaper trading fees cuz you're just trading paper essentially. With margin, you'll usually get around 3 to 10x, maybe 2 to 5x on some platforms,
which means if you've got $1,000, you can trade with two or $5,000, something like that. So, you can borrow that much. With futures, the leverage is a little bit more, so you can trade 1x leverage, which is no leverage, up to let's say
$1,000, you can actually open a $10,000 trade. trade on margin because you're literally borrowing money, right? So, you're taking a loan and that loan racks up interest every few minutes or 10 minutes
just show you, this is a a loan that you're taking. You have to pay an interest rate on the loan. You have to pay the money back plus the interest. because you're not actually borrowing any money
to take leverage trades. So, with margin, there is no funding market and you're borrowing money. So, think of that as separate. You're trading the spot market. The margin is a separate loan that you're taking out
out that loan for yourself. With futures, there is no loan of money, right? You can open a trade, you can close a trade, and it doesn't actually matter how big the trade is. You're not
doing is just opening and closing a trade, and as long as you can pay for what will be used to pay for those potential losses. So, there's no mar- any money. You're just opening trades, closing trades, and if you make a
profit, great. If you don't, then the cash that you have on the platform will funding rate is something specific to the perpetual futures market in crypto. Because this is a synthetic product, there's no underlying exchange of assets
here. Uh it's a paper product. Now, it's a has different supply and demand characteristics than the underlying spot here. They can push the price in one direction or another
spot market. And obviously, that creates a bad product, because if this is supposed to be Bitcoin dollars, and the price is wildly different than the underlying price, then it's not a
reliable product to trade, right? And so, the way that the exchanges try and keep the futures price, a derivative price, in line with the actual price of they have to use what's known as a funding rate. And you can see that right
platforms as well. I'll leave some links below to Bybit and the other exchanges I Um if you want to trade margin or futures, they usually give deposit find the details by the links in the description.
But the funding rate here is an incentive mechanism, and it tries to keep this market in line with the underlying spot price. So, if this market price is too high in relation to the underlying spot price,
buyers will start to pay a fee to the other side, the sellers, as a disincentive to keep doing that. And so, that fee will be paid out if this price is rising too much. If the futures price is too low in relation to
the spot price, the price is too cheap, and so sellers, or people that are pushing the price down, will start to have to pay this funding rate to the incentivize the price to go up again. So, this has to stay in line with the
underlying spot price. This funding rate is unique to perpetual futures, and look, sometimes you may receive this, and sometimes you may have to pay this. Usually, in the big pairs, this can work out to
maybe 5 or 10% a year, but obviously, you might receive it sometimes and pay it other times. So, it's not an interest rate that you're paying, it's basically a fee mechanism to keep this market in line. But, it's
because this may be a cost of trades that you get into. Like, if you're long and the price is going up and the funding rate is disincentivizing longs, your position open. The simplest way to describe the difference between margin
and futures, with margin, you are borrowing money from the exchange and paying an interest on that loan in order to trade with more money than you have in the spot market, so you can exchange those assets.
If you have a margin trade, you can actually even take some of that Bitcoin off the platform cuz it is actually your property. You just still have that liability of the loan with the exchange that you have to pay off at some point.
With futures, what you're doing is using cash to fund potential losses in your trades. But, you don't own the assets. You use collateral or cash to trade crypto prices versus someone else with leverage
in my account, I can take a long position, the price goes up, I make a even more cash in my account. If I make a trade with $1,000 and I make a loss, let's say I make a $500 loss, my cash
will be used to pay for the loss in that trade when I close the trade. I never show you how a margin trade would work then. So, we go to trade here, and I'll trade margin. You can either get to this by a spot or margin, it doesn't actually
matter. It's the same market, right? So, I'm going to go to Bitcoin USD or USDT. is on Bybit, but it's going to be the same for every platform. You can go to they may call it, but it's the same thing. You'll notice there's a tab on
Bybit and many other platforms like Kraken as well. Like I said, I'll leave You can get some good deposit and trading bonuses on a lot of those. So, I'm going to click margin off. Now, notice I've got
actually going to trade Bitcoin USDC, which makes it a lot easier going to go to the USDC market, Bitcoin USDC. You'll notice that I've got some USDC here. Now, the maximum amount that I can buy
without using any margin is of course the amount of cash that I have, $15. If I type margin in now, so I click this, notice that the maximum amount I can trade with now is $30. The reason being is that what will
happen when I press margin buy is that the exchange and other people that provide dollar loans on the exchange will literally lend me money to go ahead and affect this trade of $30. Now, I've still got $15 of cash.
That $15 will be used and what I'll get back is $30 of Bitcoin. I now have $30 back is $30 of Bitcoin. I now have $30 in my account plus a $15 loan. So, I've got $30 of assets minus the $15
some point, right? So, that's how it works when you can open a margin trade. The reason it's $30 here is simply because I'm using 2x leverage. So, margin is the loan of money. Leverage is the trade size in
relation to the amount of cash that I have. If I have $15 of cash and I open a $30 trade, that's 2x, right? 15 * 2 is 30. So, 2x leverage on my cash is a two x leverage trade, $30. If I change this, so I can click USDC
Let's change this to uh three. Press confirm. Notice that I can now trade with $45. 15 * three x leverage is $45. What would
happen here? I still have my $15. Let's say I buy the Bitcoin. I will now have say I buy the Bitcoin. I will now have $45 of Bitcoin and $15 of cash. Right? So, you've actually borrowed even more. So, you'll have a, you know,
30-odd dollar loan here. So, that liability remains. So, you've now got liability remains. So, you've now got $45 of assets because the loan plus the cash that you put in, $45 worth of Bitcoin and a much bigger loan, right?
$30 loan. So, you're borrowing money. We'll go You're borrowing money. When you open the trade, you will get the Bitcoin as an asset, plus you'll have the liability to pay off. Now, let's say that your
Bitcoin goes down in price. You're making a loss, right? But, you've only got $15 of cash equity that you had. The The rest is a loan. So, what's down, the exchange is going to say to you,
don't have a lot of equity in your account cuz you've got this loan minus the assets. The assets have gone down, but you've still got this loan." Eventually, if the loss comes down and you make a $15 loss, which is the amount
of equity that you had, the exchange will sell your Bitcoin, pay off your loan, and you get liquidated. If you make a profit, uh then obviously you're making more in profits as a percentage of your
underlying cash that you put down. If you make a profit, what you can do is some of the loan. And that's when, you know, using margin you. But, there's of course risk, right? There's risk with the downside that can
be bigger um because you're taking the loan as well and that loan has to be market, so we have to go to the different trade screen here. So, trade futures will trade USDT. It doesn't actually
matter in this case. With futures, all you need to do is put and trade with. That's the value that the exchange is going to use to pay off any potential losses in your trades. There's no loan here. We just have to
figure out how much loss can we handle with the cash that we have. Notice here that I've got some USDC in my account and it's $15, right? But notice how I'm trading with USDT here.
account the platform doesn't really care what you have in there. Like you can have USDT, you can have USDC, and some Ether and other crypto assets in there. All they care about is that you have
some value in there known as collateral or cash that they can use to sell losses that you have in your trades. So, you might have USDC, USDT, and Bitcoin.
Let's say it's $1,000 worth. That is $1,000 marked to market, right? They can sell all of that immediately to raise $1,000 cash. As long as you've got that there, they'll let you trade with pretty much any trade size because
they're not lending you money in this case. They actually don't care what you big your trade is. They only care that you can pay for a potential loss in that So, I've got some dollars in my account here, USDC, and I can go ahead and
trade. I can open a position. Now, with futures, what you can do is go up here and trade the amount of leverage that you trade with. So, again all that means is let's say I'm using 10x leverage and I want to trade $100.
10x leverage and I want to trade $100. Notice that the cost to me is $10. So, with leverage in the futures market, again, leverage is the trade size in relation to the cash that you have down. So, if I'm using 10x leverage and my
trade size with the market is $100, that means with 10x leverage, I'm putting $10 What that means is that because I've only got $10 of cash, only got $10 of cash, that $100 trade, if it moves down 10%, I
make a $10 loss. My cash is completely wiped out. The trade will get liquidated. Right, the platform is not going to allow bad trades or bad debts. If you have a $100 trade with a $10 in there, it falls 10%, they're just going
to say, "You lost." That $10 use is used to pay off the trade. No bad debts. That's the 10x leverage there. So, $100 trade, $10 down. That's 10x leverage. If I have a $100 trade and I put like 5x leverage here, you'll
notice that still $100 trade, but obviously it's a $20 cost now. 20 * 5x leverage. I can now withstand a 20% drawdown in the price, right? So, much cash you have to fund that poten- uh potential trade. The difference is
you're not borrowing any money. You're just basically opening a trade. As long as you can pay for it, that's fine. When you close it, you exchange the profit or the loss. With margin, you're taking a loan and you're you're buying the asset.
And if the asset goes up, you can sell it to pay back the loan. If not, then money, right? You'll pay back the loan and actually take some of your cash out. ahead and buy the assets. If you want to see different trading strategies and
leave those down in the description. Depositing trading bonuses to the exchanges I use will be down there as well. I'm James as my Z G. Cheers for watching and I'll see you in the next one.