This error occurs when you attempt to trade inverse contracts on ByBit using Cross Margin or Portfolio Margin Mode without enabling the required settlement asset (e.g., BTC, ETH) as collateral.

In inverse contracts, the settlement asset (typically the same as the contract's base currency) must be activated as collateral to back your trades.

Solution:
To resolve this, navigate to Unified Trading > Collateral Settings in your ByBit account. Enable the settlement asset (e.g., BTC) as collateral "Used As Collateral". Once activated, you will be able to trade inverse contracts under the selected margin mode. If the issue persists, ensure your account is correctly set up for the intended margin mode.