Right now, it’s estimated that there will be about 1.3 billion people using their phones for payments by 2023. This means that nearly 16% of the world will use their phones for transactions – including crypto trading.
As a crypto trader, the fantastic thing about mobile transactions is that you can buy and sell your digital assets anytime and anywhere. And usually, you can start and end transactions almost immediately. This process is called spot trading in crypto.
So, “what is spot trading?” We’ve got all the answers. Read along!
What is A Spot Trade?
A spot trade or spot transaction happens when you buy and sell an asset (like crypto) at an agreed date.
Crypto spot trading means buying and selling cryptocurrencies on a crypto exchange. These transactions are settled immediately – or on the spot. Hence, the name.
To understand a spot trade, imagine you’d like to buy a pair of sweet Nike sneakers from an online vendor:
- You contact the vendor and ask for how much the kicks are
- Once you agree to a price, you make an offer and the vendor agrees
- You make the payment and inform the vendor.
- At an agreed date, you get your sneakers.
Now, let’s apply that to what happens in the crypto world. You meet a crypto seller and let them know how much you’d like to buy. Once you make the payment, they send your coins in an instant.
Take our Quiz: Which Cryptocurrency should you buy?
Alternatives to Spot Trading
As you can probably guess, spot trading isn’t the only type of crypto trading there is. Instead of agreeing to the price of a coin instantly, you could agree to a futures contract with a fellow rader. Here, you and the other party agree to trade a coin at a later date and a specific price.
What’s a Spot Market?
A spot market is a platform that allows you to buy and sell coins instantly. Most crypto traders handle their spot trades on exchanges, which offer instant trades.
But, you could also trade over-the-counter. Some exchanges have over-the-counter (OTC) trading services that allow traders to buy and sell coins without listing the trades on the exchange’s order book. OTC trading usually involves large sums of money and traders who want to remain anonymous.
How Spot Markets Work
In the crypto spot market, buyers and sellers set their spot prices for a coin by posting their buy and sell orders in the order book. These prices vary every second because of the market’s volatility. As more orders are being added to the order book every second, these prices change very quickly.
Advantages and Disadvantages of Spot Markets
Advantages
1. More Potential Profits
You will likely profit more from spot trading since you can buy and sell cryptocurrencies at the same time. Also, spot markets require less capital than futures markets.
2. Transparency
Buyers and sellers have to include their spot prices in the order book. So, it’s easy to compare prices before entering a contract.
3. Easy Negotiation
Since the spot market is public, it’s easy for buyers and sellers to negotiate prices in their favor.
Disadvantages
1. High Risk
The crypto spot market is volatile. So you can buy a coin at a higher price and lose some money when it returns to its true price.
2. Inadequate Planning
You might not be able to plan well ahead in spot trading because you have to trade on the spot.
Spot Market Vs Over-the-Counter
Like we said earlier, spot trading can happen on different crypto exchanges. For example, you can buy crypto from other traders or sell to them on a spot market like Quidax.
Alternatively, you can trade directly over-the-counter with other traders without a third party or cryptocurrency exchange involved.
How to get Started with Spot Trading Cryptocurrency
Now that you have learned all about spot market and spot trading, it’s time to take the next step in your cryptocurrency journey. With Quidax, you can take advantage of a secure exchange with continuous real-time pricing in accordance with the market.
To get started, open an account, add funds using USDT, crypto, or your local currency, and trade away?!
What is the Best Crypto to Spot Trade?
With thousands of cryptocurrencies around, it might be hard to determine which is the best to trade with – especially if you’re just starting your crypto journey. However, it might be best to stick with major coins like Bitcoin, Ethereum, Binance Coin, etc.
Interestingly, these cryptocurrencies and more are available on the Quidax exchange to buy, sell, or HODL for the future. Here at Quidax, our focus is on making trade as easy as possible, from our instant coin swap to our order book that you can easily explore. We also offer a free crypto academy course to get you started. This way, you can have a basic knowledge of crypto and hit the ground running when you sign up on Quidax.
Disclaimer: All content in this article is general information and is not the opinion or perspective of any particular individual or entity. Nothing in the article is professional and/or financial advice. Evaluate all information properly before making decisions.
