What is the Difference between Crypto Spot & Futures Trading?
Crypto trading is experiencing meteoric growth with millions of users joining the league every day. Until late, spot trading was the only popular mode of exchanging cryptocurrencies across platforms. However, to provide the users with variation, exchanges have rolled out futures trading. As expected, investors have witnessed a parabolic shift in the investment markets making cryptocurrency software development increasingly popular. Today, most services have come up with innovative platforms that offer crypto futures and spot trading at the same desk. In order to attract more users, investment platforms have introduced both trading types. However, cryptocurrencies are a complicated area and not all users may understand them easily. Therefore, it is necessary to educate the users about the pros and cons of both trading types in detail.
Before you plan for cryptocurrency exchange website development, check out the essential difference between both trading types.
In a conventional trading system, the spot market deals with commodities, currencies, stocks, and bonds traded in the present time. On the other hand, futures trading ensures the delivery of committed assets on a prefixed date in the future.
While spot trading negates future uncertainty through the execution of transactions on the same date, futures trading is riskier and should only be done by experienced traders.
Now that we know about the conventional trading system, it is time to explore the features of Crypto Spot Trading and Crypto Futures Trading.
The Concept of Crypto Spot Trading
Similar to the conventional practice, cryptocurrency spot trading deals with the instant buying and selling of digital assets such as Bitcoin and Ethereum on the same date. In a spot market, the buyer owns cryptocurrencies and their economic benefits such as staking participation. The seller detaches itself from all the benefits once the digital assets are transferred to the buyer after the completion of the transaction.
Numerous crypto exchanges facilitate spot trading activities, allowing the investors to execute fiat-to-crypto and crypto-to-crypto transactions. Spot exchanges play the role of a common platform where buyers and sellers bid and ask for a crypto asset. Once a bid or offer is matched, the exchange executes the trade. Moreover, these are operational 24 X 7, enabling the investors to buy/sell at any given point in time.
The Concept of Crypto Futures Trading
In Crypto futures trading, you buy or sell contracts that are associated with a specific cryptocurrency. When you buy a futures contract, you do not own the associated cryptocurrency at that time. Instead, you own a contract with an agreement to buy or sell a specific cryptocurrency on a pre-fixed future date.
In a way, the ownership of a futures contract does not replenish with any economic value such as voting and staking. One should also remember that crypto futures contracts carry protection against market volatility and abnormal price movements on their associated currency.
With futures contracts, the buyers, and sellers negate price volatility and make a profit from price movements. Here, the buyers and sellers can speculate on a cryptocurrency’s price rather than buying the digital asset.
If the investor expects the value of a crypto asset to rise, he will purchase a futures contract. Similarly, if the investor is expecting the value to go down in the future, he will sell the crypto assets to gain maximum when the value is high.
The result of the prediction leads an investor to profit or loss. Hence, if the predictive research has a solid base, one can earn well from crypto Futures Trade.
While spot or futures trading crypto exchange development, understand the essential features to include.
Easy access and user interface
Mobile technology has enabled crypto investors to make transactions from anywhere at any time. A successful exchange owner would like to have a web as well as a mobile platform that is user-friendly and enables the investors to transact with a few clicks. Ease in performing transactions can attract new entrants in the crypto world that will benefit the exchange.
Exchange Transaction Fee
For any crypto exchange owner, the transaction fee is the most important factor in attracting more users to the platform. Some crypto owners charge a specific trading fee and others charge a percentage of the transaction. Some exchanges have now started asking for extra services which include predictive analysis and expert opinion. The investor or the platform user compares all the charges and selects an exchange that seems more profitable. Hence, it is highly recommended that the crypto exchange owner should charge realistic fees which are acceptable to the investors.
High liquidity
High Liquidity means that the exchange has more buyers and sellers that reduce the transaction time in Futures and spot trading. More users mean more options to buy and sell. This leads to quick spot matching and spot traders can have more options to choose from for buying or selling digital assets.
An exchange must be compliant with the laws of the countries where it operates and also in the country where it is registered. Since cryptocurrencies are interoperable, it is important to know that different countries have different laws about cryptocurrency and their transactions. A fully compliant exchange means it will earn more trust from the investors as well as get uninterrupted support from the banking and financial structure of the land.
We can see that crypto exchanges use innovative and high-end technology to create a robust platform for investors. Software Developers operating in the field of Blockchain technology know how to make use of the technology to provide a seamless and unforgettable experience to users. Since the stakes are high, crypto exchanges will keep flourishing with more innovative solutions.
If you are planning to build your crypto exchange, Antier Solutions can help. We offer customized solutions to build world-class exchange platforms fortified with market-leading features. Whether you need a spot trading exchange or a futures trading exchange, we successfully cater to your needs.
Schedule a free demo of our white label crypto exchange or connect with our subject matter experts to share your needs for a custom crypto exchange development.
