The definition of Spot Trading
Spot trading involves exchanging one cryptocurrency for another, buying and selling coins, and exchanging fiat money into cryptocurrency. Like in the Forex, you can also buy and sell a cryptocurrency for another, like Bitcoin or altcoin for USD and Euro. This is one way of getting involved in the world of cryptocurrencies without having to mine it.
We has 3 Spot Trading Zones: BTC zone, ETH zone and USDT zone.
Advantages of Spot Trading
- Lower cost of asset switching
- Provide arbitrage opportunities on the platform
- Anonymity
- Better circulation and liquidity among digital assets
In the traditional market, all the digital assets are quoted using fiat money. If we want to buy ETH, we need to sell an amount of BTC and then purchase ETH, incurring a transaction cost in both the buying and selling of BTC and ETH respectively. This incurs extra transaction costs. However, in Spot Trading, you can exchange BTC to ETH directly, thus lowering costs.
Spot Trading Pricing Mechanism
Like in the traditional market, the market price in Spot Trading varies according to changes in demand and supply. If the demand is larger than supply, prices will rise; if the supply is larger than demand, then prices will fall.
For instance, in the spot market, if many people wish to exchange BTC for LTC, the demand for LTC will rise, causing an upward pressure on the exchange rate of LTC/BTC, meaning that more BTC will be required to exchange for 1 LTC.