What it means
Linear perps quote and settle in USDT (or USD-stablecoin): PnL in USDT, margin in USDT. Inverse perps quote in USD but margin and settle in the BASE asset (BTC for BTC perp, ETH for ETH perp). PnL in inverse perps is denominated in the base asset itself — meaning losses compound (a 10% drop in BTC reduces both your position AND your margin's USD value). Original BitMEX perps were inverse; most modern exchanges (Binance, Bybit) offer both.
Why it matters
Inverse vs linear changes the risk math. Linear is straightforward: a 10% drop on a 1x position = 10% USD loss. Inverse compounds: a 10% drop on a 1x inverse position = ~11% loss because your collateral also lost value. For BTC bulls who want to grow their BTC stack regardless of USD price, inverse is natural. For traders thinking in USD terms, linear is intuitive.
How to use it
Default to linear (USDT-margined) for active trading — simpler PnL accounting, cleaner risk math. Use inverse only when you want crypto-denominated returns and accept the compounding-loss risk.
Want a worked example or a deeper dive? Ask Rocky how this concept applies to your specific watchlist or trade idea.
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