What is Crypto Futures Trading?
Crypto perpetual futures contracts are derivatives that represent the value of a specific cryptocurrency. You do not own the underlying cryptocurrency when you purchase a perpetual contract. Instead, you own a contract without expiration or settlement date.
What is Crypto Spot Trading?
In the spot market, you buy and sell cryptocurrencies such as Bitcoin and Ethereum for immediate delivery. Cryptocurrencies are thus directly transferred between buyers and sellers.You have direct ownership of cryptocurrencies and are entitled to economic benefits, such as voting for governance or staking.
What are the differences between Crypto Spot Trading and Crypto Futures Trading?
Leverage - Leverage makes perpetual trading extremely capital-efficient. With a perpetual contract, you can open a 1 BTC perpetual position at a fraction of its market value. Spot trading, on the other hand, assuming you only have 1,000 USDT available, you could only buy 1,000 USDT worth of Bitcoin.
Flexibility to Long or Short - If you hold cryptocurrencies in the spot market, you may benefit from appreciation as the value of your cryptocurrency rises over time. However, perpetual trading allows you to profit from short-term price movements in either direction. Even if the price of Bitcoin falls, you can earn from the downtrend. Perpetual contracts can also be used to hedge unexpected risks and extreme price volatility for long-term investors.
Prices - Cryptocurrency prices are determined by supply and demand. The spot price rules all transactions in the spot market while the perpetual price is based on the prevailing spot price plus the premium. The premium could be either positive or negative. Changes in supply and demand of perpetual may cause the premium to fluctuate.
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