How Does Using Stablecoins versus the Underlying Cryptocurrency (E.g. BTC) as Collateral Affect Leverage?

Using stablecoins as collateral simplifies leverage calculations and generally allows for higher leverage. Since stablecoins maintain a stable value, the collateral's fiat value is constant, meaning the margin requirement is fixed and predictable.

If the underlying asset (e.g. BTC) is used as collateral, its volatile price constantly changes the fiat value of the margin, which can lead to rapid "auto-deleverage" events or early margin calls even if the position's P&L is favorable.

Stablecoin collateral offers greater capital efficiency for leverage.