Spot Market

The spot market in cryptocurrency refers to the marketplace where digital assets are traded for immediate delivery and payment. In this market, transactions are settled 'on the spot', meaning the asset is exchanged for cash or another asset immediately or within a short period, typically a couple of days. It contrasts with the futures market, where contracts are traded for future delivery of the asset at a predetermined price.

Examples of spot market transactions include buying Bitcoin with US dollars on a cryptocurrency exchange like Coinbase or Binance, or exchanging Ethereum for another cryptocurrency like Litecoin on a trading platform.

Case: Alice wants to buy 1 Bitcoin using her US dollars. She goes to a cryptocurrency exchange, places a market order, and receives 1 Bitcoin in her wallet immediately upon execution of the trade. This transaction occurs in the spot market because the Bitcoin is exchanged for dollars at the current market price, and the settlement is immediate.

Another case: Bob owns 10 Ethereum tokens and wants to sell them for US dollars. He places a sell order on a cryptocurrency exchange, and when the order is matched with a buyer, he receives the agreed-upon amount of US dollars in his account. This transaction also takes place in the spot market since it involves immediate exchange and settlement of assets.