How Does the Use of Stablecoins as Collateral Affect the Effective Leverage in Crypto Futures?

Using stablecoins (like USDC or USDT) as collateral reduces the effective leverage volatility compared to using a volatile asset like Bitcoin. When Bitcoin is used, a sharp drop in its price simultaneously reduces the value of the collateral and increases the position's risk, causing a double-whammy that accelerates liquidation.

Stablecoins provide a more reliable collateral base, offering a more predictable effective leverage.