The bitcoin and digital assets sector are growing and thriving. It is becoming an essential component in an increasingly constrained world in the traditional financial market.

While bitcoin and the digital asset market slowly grew over the years, it is now different and accelerates rapidly and phenomenally. That is a beauty in and of itself. We are sure to see continuous evolution within this sector due to a wide variety of circumstances and situations.

The evolution will continue to occur for the bitcoin and regular digital asset ecosystem, but we will also notice a shift in bitcoin’s trading aspect.

It is indeed an exciting new industry that draws all kinds of people to participate in its overall growth. From builders to the significant volume present in spot crypto trading, there’s many ways to get involved and further this sector.

For instance, bitcoin and future digital currencies did not have any markets, and people could not ascertain the value in the beginning. Now, you have a wide variety of entities that facilitate trading and price discovery at spot and futures markets.

Where a spot market is the market at the present time, and futures are contracts today for what might happen tomorrow.

There’s much to learn about spot markets in cryptocurrencies and how they bring massive value to the sector. Let’s find out more about the spot markets and how they matter in the crypto speculation industry.

What Are Spot Markets?

Spot markets are markets where individuals gather virtually to buy and sell assets at real-time prices. A spot market will deal with current prices and is all about assets at the present time.

Spot Price

The spot price is what you will see listed on Coinbase or your respective exchange from minute to minute. The spot price changes as people buy more or sell more. The more they buy, the higher the price, the more they sell, and the lower the crypto price at the spot level.

Details on the Spot Trades

Speculators that deal in the spot market will notice contracts that they purchase will execute immediately. That means that they are booking orders and executing them right now. This spot transaction will have a buyer and a seller. The buyer will expect the financial instrument and the cash will transfer over.

Finance leaders and professionals within the financial sector will notice that the spot market may have different names such as “cash market” and the “physical market”.

Traders will notice that purchases will settle in cash at present price levels as dictated by the market. It is not about the price point during distribution but about what the price is right now.

Spot market commodities in the present era include corn, wheat, crude oil, and other commodities. In the traditional market, traders can bet on the spot prices and even expect delivery of oil, corn, and other commodities at a mutually agreed-upon place. They would expect delivery when the trade finalizes.

Recall that, in this case, a commodity is classified as essential goods that may have alternatives in the commodity category. You would notice that even gold, other precious metals, and other sources of energy are commodities.

These commodity units will have specific standards and adhere to these standards to arrive on the spot markets. Spot markets have large liquidity in most times and makes up a good portion of the traditional trading market.

Two Kinds of Spot Market

The cash market wherein commodities trade for immediate delivery will break down into two segments. It will differ from futures environments where the transaction will take place in the future.

These two segments that spot markets breakdown into include:

Exchange Markets

The financial transaction will take place on an exchange and will utilize the real-time trading price present within the particular exchange market.

A few exchanges in the traditional sector:

  • Bombay Stock Exchange
  • New York Stock Exchange
  • E-Trade

A few exchanges in the cryptocurrency sector:

Over The Counter

The Over the Counter trades will occur in a more private setting between two parties with different trade details. These over the counter trades occur in a more obscure market but still occur in real-time and will have an immediate delivery of the goods.

These trades are legitimate and will transact like other deals, but each party may have more customization in the over the counter markets.

Spot Markets and Futures Markets

In the traditional market where we look at gold, wheat, oil, and other commodities, we will notice that futures markets must include storage costs. Recall that two parties enter into an agreement today for something that will occur in the near term future in a futures transaction. Similarly, futures transactions will also fluctuate in value as price in the present market gyrates.

Conversely, spot markets happen right now, and so the factors present in the equation are supply and demand. Prices will fluctuate, but trades are happening right now instead of in the future.

Recall that perishable or durable goods will also have price variances based on how long they can last.

Spot Markets in Cryptocurrencies

Spot markets in crypto work in the same way they do for traditional markets. The only difference is that instead of speculating on real world assets you are wagering on digital assets, projects, and the people behind these projects.

You are also wagering on the concept of digital assets and how they will fare in the present and over the long-term.

Spot markets in cryptocurrencies also include:

  • Exchange
  • OTC Markets

Your spot trades are the regular trades you make on entities like Binance, Coinbase, and other known names.

Your OTC trades are those that you would make via the over the counter market on places like local bitcoins or more institutional places.

Why People Love Spot Trades in Cryptocurrency

Spot trades are simple and straightforward. They do not require you to understand many different financial concepts. Leave margin, leverage, excessive borrowing, and other concepts out of the picture and focus on the simple regular trading.

Instead, spot trades necessitate a firm understanding of the current market sentiment, fundamental analysis, and technical analysis.

Spot trades are those that you make every single day on your favorite exchange.

How to Spot Trade

Spot Trading is fairly simple, all you must do is make sure to have a decentralized or centralized wallet, acquire your favorite cryptocurrency and sell when it goes higher.

Voila. You now have a profit in your spot trade.

You are not done yet as you must continue to make more spot trades and increase your portfolio. Of course, traders will want to ensure simplicity in capital preservation and want to implement risk management techniques.

But that is essentially the market and how it works.

A large portion of the bitcoin and alternative currency trading took place in the largest run up in 2017, and it was spot oriented. That market enthusiasm would give exchanges across the world a broad base of users as everyone sought to make a quick buck.

Spot trading includes fiat to crypto and crypto in the digital asset domain. Digital asset exchanges seek to ensure a higher level of customer experience in simplifying fiat on-ramps and off-ramps.

That is why spot traders can store assets on an exchange, earn interest in some cases, conduct deposits, and withdrawals, among other actions with pure simplicity.

Spot Trading Is a Simple Concept

Thankfully, cryptocurrency spot trading is simple to understand. All you must know is that spot trading is about what is happening right now. It is about the price and the trade right now.

If you can learn to buy low and sell high, you have the potential to continue to grow your portfolio.

Remember that it is up to you to choose to opt into sectors that you are about in the crypto world. Always practice safe trading and protect your assets.