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What is Spot Trading
2022/03/08 18:01:15

Please check our tutorial video to help you solve your problems or understand more regarding related topics.


If you would like to know more details, please read the whole article below.

 

Here is our tutorial video: https://youtu.be/nErK3HHrUQo

 

1. What is Spot Trading?

 

Spot trading is the simplest way to invest and trade. In crypto trading, the first time you trade is most likely a spot transaction in the spot market, such as purchasing bitcoin(BTC) at the market price and hodling it for a long time.


When we look at the price of a trading pair, it involves two currencies, such as in the BTC/USDT trading pair, we measure 1 BTC with USDT. In this case, the price of bitcoin (BTC) is 50,000USDT, which means if you want to have 1 bitcoin (BTC), you have to spend 50,000USDT. What if you want to sell bitcoin (BTC), you can earn 50,000USDT from selling your 1 bitcoin(BTC). In crypto trading, you do not have to buy an entire bitcoin or any other cryptocurrency, you are able to buy a fraction of that token, such as 0.001 bitcoin (BTC). On FAMEEX, we provide 2 sections of crypto spot trading: Ethereum (ETH) zone and USDT zone. You can purchase any token you want with ETH-based and USTD-based trading pairs.

 

2. Spot Trading vs Fiat Trading


Some spot trading pairs are fiat-based, which means you have to use fiat to buy the digital assets (crypto) you want, such as in BTC/AUD, you have to use Australian Dollar to purchase Bitcoin (BTC). When you sell your Bitcoin (BTC), you will receive AUD. On FAMEEX, if you pick the ETH/BTC trading pair, AUD will be replaced by Bitcoin (BTC). You need to use how many Bitcoin (BTC) to buy 1 Ethereum (ETH).  For example, 1ETH=0.01795BTC, you have to use 0.01795 Bitcoin (BTC) to get 1 Ethereum (ETH), when the price of Ethereum (ETH) rises to 0.2 BTC, then you sell your ETH, you will get 0.2BTC.


3. The Advantages of Spot Trading


Without crypto to crypto spot trading pair, if you are holding Bitcoin (BTC) and you want to get some Ethereum (ETH), you have to sell your Bitcoin (BTC) into fiat currency, then you turn your fiat into Ethereum (ETH). These processes involve two transactions and you pay a double transaction fee. In crypto to crypto spot trading, you can just directly sell your Bitcoin (BTC) into Ethereum (ETH).

 

  1. --Lower the cost of switching between digital assets

  2. --Provide a chance of arbitrage

  3. --High degree of anonymity

  4. --More convenient switching and transferring digital assets

 

4. How to determine the price of crypto to crypto spot trading?

 

In a free market, the price is always determined by the market, which means demand and supply, no matter if it is in traditional financial markets or cryptocurrency markets. The price of Bitcoin (BTC) goes up, because the buying power (demand) is larger than the selling power (supply). On the other hand, if the selling pressure (supply) is larger than the buying power (demand), then it would drive the price down. For example, In LTC/USDT (Litecoin/Tether) trading pair, if a lot of Tether (USDT) holders are willing to sell their USDT into Litecoin (LTC), which means the demand for Litecoin (LTC) increase, it could drive the price of Litecoin to Tether up. You have to use more Tether (USDT) in exchange for 1 Litecoin (LTC). 

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