I’m trying to get my head around how the Inverse Perpetual contacts work. And failing.
From a short position point of view i found information that says i have to borrow BTC. But where am i borrowing the BTC from… is it from the exchange inventory like Binance/Bybit ? So I borrow BTC from the exchange in order to to sell to someone in the order book BID/LONG side ?
Because when i enter a short position, i’m not selling my BTC am I ? If i used 5x leverage for example then the position size might be larger than my BTC holdings so my BTC is just there to cover the margin price i think.
On the flip side, if I wanted to go long then I need to buy. But again, if i have 1 BTC and long with 5x then i need 5 BTC… so do i borrow BTC again directly from the exchange so i can buy from someone in the order book ASK/SHORT side ?
Am i on the right tracks here ?
I feel this should be simple but i’m getting confused somewhere. Can someone explain to me like i’m 5 years old please lol.