The difference between Spot and Future trading in digital currencies:
1. Spot Trading:
Assets (such as cryptocurrencies) are bought and sold directly and instantly.
The investor owns the asset after purchase and can keep it or sell it.
There is no leverage, so there is no risk of losing more than your invested capital.
Prices reflect the actual market value of the asset.
Example:
If you buy 1 Bitcoin for $30,000 on Spot, you own the Bitcoin directly and can keep it or sell it later.
2. Futures Trading:
Trading is based on contracts that reflect the future value of an asset, not the asset itself.
Leverage is usually used, allowing the investor to trade with amounts larger than his capital.
Profits (or losses) can be made whether the price goes up or down.
It involves higher risk, as you can lose all or more of your capital in case of high leverage.
Example:
If you expect the price of Bitcoin to rise, you can open a long contract at $30,000 and use 10x leverage. If the price rises to $31,000, you make a bigger profit. But if the price falls to $29,000, you could lose more than you invested.
Main difference:
Spot: Direct trading and ownership of the asset.
Future: Trading based on expectations and leverage without owning the underlying asset.
