Spot Trading

Spot trading is the buying and selling of cryptoassets where the transaction is executed under current market conditions and the purchased asset is generally credited to the buyer after execution.

For example, when a user buys BTC in the spot market, the user exchanges the quoted asset for BTC. Once the trade settles, the BTC belongs to the user and can generally be withdrawn, transferred, or used elsewhere.

How the price is formed

Spot prices are formed through interaction between buy and sell orders in the order book. Orders can execute at market prices or at prices specified by the trader.

Important market variables include bid, ask, and spread. When liquidity is insufficient, the actual execution price may differ from the expected price.

Spot vs. derivatives

The main difference between spot trading and derivatives trading is that spot trading directly transfers the underlying asset. A derivative contract instead derives its value from the underlying asset and may not involve delivery of that asset.

Spot trading can also be performed without borrowed capital, although some platforms provide additional financing and margin mechanisms.