Spot Trading

Spot trading refers to the purchase or sale of a financial instrument, such as cryptocurrencies, for immediate delivery and settlement. In spot trading, assets are bought or sold at the current market price and settled within a short period, typically within a few days. It contrasts with derivative trading, where contracts are bought or sold based on future prices.

Examples of spot trading in cryptocurrencies include buying Bitcoin with US dollars on a cryptocurrency exchange and selling Ethereum for Tether. In these transactions, the cryptocurrencies are exchanged at their current market prices, and the ownership of the assets is transferred immediately after the trade is executed.

Case:

A trader wants to buy 1 Bitcoin at the current market price of $50,000. They place a buy order on a cryptocurrency exchange, specifying the amount and price. Once the order is matched with a seller willing to sell 1 Bitcoin at $50,000, the trade is executed, and the trader becomes the owner of 1 Bitcoin. The settlement occurs immediately, and the trader can withdraw or transfer the Bitcoin to their wallet. This is an example of spot trading in the cryptocurrency market.