Q. What is an Inverse Contract?
A: The Inverse contracts use BTC/ETH/EOS/XRP as the base currency. Traders need to confirm traded quantity in terms of USD (Quoted currency), and then use their base currency (such as BTC, ETH) to calculate margin, profit and loss. If a trader wants to trade BTCUSD contract, he must use BTC as his base currency. If he trades on ETHUSD contracts, he needs to hold ETH.
Q: Can I trade ETH if I have BTC on Bybit?
A: No, traders will require ETH assets to trade ETHUSD perpetual contracts. However, Bybit has an Asset Exchange function to conveniently allow traders to exchange their BTC assets into ETH assets instantly to facilitate trading ETHUSD. The same applies to all coins current present on the Bybit platform.
Q: How is Bybit inverse perpetual contract quoted?
A: Inverse Perpetual Contracts are quoted in USD, but all the profit & loss will be settled in base currency (BTC and others). Each contract is 1 USD value. This feature is specifically designed to provide convenience to all traders as it allows trades as low as 1 USD to be easily keyed instead of inputting a string of decimal places in BTC such as 0.000XX BTC.
Long position Profit & Loss = Contract Value x (1/Entry Price - 1/Exit Price)
Using BTCUSD contract as an example
If a trader buys 10,000 contracts at BTC = 8,000 USD on Bybit
What he is actually doing is that he is selling 10,000 USD and buying an equivalent value of BTC (10,000/8,000), which is equivalent to 1.25BTC
Suppose the trader decides to close all contracts at BTC = 12,500 USD on Bybit
Again, what he is actually doing is buying back 10,000 USD worth of contracts and selling the equivalent value of BTC (10,000/12,500) which equates to 0.8 BTC
Profit/Loss for a short position = Beginning Value of Quote Currency - Ending Value of Quote currency
= 1.25 BTC - 0.8 BTC
= 0.45 BTC