As the crypto industry is evolving, more and more people aim to be a part of it. Crypto assets trading and investment is an excellent option to profit in the short term, attracting many beginner traders and crypto enthusiasts. The market offers numerous trading platforms enabling convenient tools for quality and successful investments:
- spot trading;
- futures trading;
Let’s consider two of them – futures vs spot crypto.
What is Futures Trading?
Futures is a popular financial tool used for about 100 years now. Traders use this type of trading to predict the future price of different valuable commodities (gold, silver, oil, etc.). In fact, futures trading is betting on the future asset (commodity price at some point in the future. How to trade crypto futures?
Two parties conclude a derivative contract, which implies that one of them bets on the asset’s price growth, and another one believes the price will fall. They agree on the price and the date when they must fulfill their agreement. When the contract’s date expires, the parties must buy or sell the asset. A buyer is the one who thought the rate would drop, and a seller is the one who forecasted price growth.
It is a rather complicated type of trading because there are huge risks of losing funds if the prediction was not made correctly and the market moves the opposite side.
Crypto Spot vs Futures
Spot trading implies purchasing and selling crypto assets at the market price, and this is also called “spot price”, which means the current asset’s rate. This type of trading implies that a trader receives the bought assets immediately. This is the first difference between spot and futures – futures trading does not mean buying an asset right away. On the contrary, a trader buys a contract and, when it expires, buys (or sells) assets themselves.
The second difference is, of course, price. While spot trading implies the current market price, futures are all about speculation or forecasting of the future price.
Analyzing spot vs futures crypto, we dare say that spot is a simpler type of trading that does not require forecasting skills and in-depth market knowledge.