In this article, we only discuss the differences between Spot and Futures trading in cryptocurrency markets, and Futures Trading refers to Futures Perpetual Contract trading.
What is Spot Trading?
Spot Trading refers to buying or selling cryptocurrencies in real-time settlement, realizing the exchange between two different cryptocurrencies, which will be credited to your account.
What is Futures Trading?
In Futures Trading, you're not actually trading the "crypto", but the "contracts" that represent the crypto. Holding the contracts means you will buy or sell the represented crypto at a certain time in the future.
Differences Between Futures Trading and Spot Trading
In Spot Market, the value of what you buy equals what you pay.In Futures Market, however, trading is leveraged. It allows traders to trade in excess of their capital with capital efficiency.For example, let's say the current price of BTC is 45,000 USDT. In Spot Market, to buy 1 BTC, you need to pay 45,000 USDT; but in Futures Market, by 100x leverage, you only need to pay 450 USDT as margin.Please note that, while using leverage in Futures Trading improves your capital utilization and profit, the trading risk also increased.
2. Both-Sided Trading
In Spot Trading, you can only trade in one-side, and gain profit when the price of your holding assets rises.
In Futures Trading, you can trade on both sides: buy long when seeing a rise and sell short when seeing a fall. Therefore, Futures Trading is usually chosen to hedge the risk of price fluctuations in the Spot markets to ensure asset value. Or, you can just gain profit directly from the fluctuating Futures market.