A spot market is the most commonly used market in the trading world because in a spot market, financial instruments like cryptocurrencies are traded for immediate delivery. In contrast, a forward or a futures market trades contracts, not the financial instruments themselves, which promise the delivery of an underwritten asset at a specified future date.
When you buy cryptocurrency on the spot market, you immediately exchange your fiat currency and you become the new owner to the corresponding number of coins or tokens (or fractions of them).
Fiat currencies are the government-issued currencies that we have been using ever since we were born. Today we can conveniently use them in the digital environment.
The live price of a cryptocurrency that you see on an exchange screen is called the spot price, meaning it is the price at which you can buy and sell assets immediately.
In larger, sizable markets with high trading volume and liquidity, the spot price of a financial instrument changes constantly because at least thousands of market participants create their buy and sell orders at any given instant. With a large number of participants, orders get filled rapidly and are followed by new orders. In very large spot markets, prices can change in milliseconds.
When there is more demand by buyers than sellers for a cryptocurrency, in other words when the buy order books outsize the sell order books, the price of the cryptocurrency may likely go up.
In traditional markets such as stocks, commodities, bonds, etc, trading hours are most usually the business hours of the jurisdiction that the exchange is located. However, since crypto is global without any location, the cryptocurrency spot market is available 24 hours a day and 7 days a week, which allows you to trade cryptocurrency whenever you want.
The main advantage of a spot market is that you can buy and sell the asset immediately. The spot market tends to be the most active and liquid for this reason.
Although the common disadvantage with spot markets is that you immediately need to take delivery of an asset, this is not an issue with cryptocurrencies because they exist solely in the virtual world. So when you buy crypto in the spot market, it is just sent to your CEX.IO balance.
CEX.IO ecosystem offers a cryptocurrency exchange that allows users to trade in the spot market. You can place orders to buy and sell cryptocurrency on the Trade page.
For information purposes only. Not investment or financial advice. Seek professional advice. Digital assets involve risk. Do your own research.
