Buy Bitcoin with Your Own Money By Spot Trading

Salomon Kisters

Dec 19, 2023

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Cryptocurrency trading takes many shapes and forms, some more risky than others. Spot trading is a popular trading method because it offers several advantages, such as liquidity, transparency, and flexibility. New cryptocurrency traders, in particular, prefer spot trading over margin and derivatives trading because it ensures a relatively streamlined experience, not to mention they actually own the assets they acquire. It’s not a sophisticated method of trading, yet it’s not infallible. You can respond to market movements right away and take advantage of short-term opportunities.

Spot Trading Refers to The Immediate Exchange of Bitcoins

Spot trading is the process of buying and selling Bitcoinat the spot price, i.e., its current market price. The aim is to buy low and sell high to realize profits in the cryptocurrency markets. It’s called spot trading because the trade executes on the spot, so you can buy and sell at the real-time market price. When engaging in this type of trading, you take ownership of Bitcoin, so this differs from trading an ETF. The trade can only be completed with the money you have on account of the immediacy of the trade, so ensure you have enough money in your wallet.

You can buy as much Bitcoin as you can afford, not more, which is why spot trading is safer compared to other trading strategies. Spot trading isn’t the same thing as HODLing, even if you attempt to make gains in the short term by regularly buying and selling Bitcoin. HODLing is where you’re patient enough to wait for the cryptocurrency markets to recover without monitoring much of the movement. Spot trading, on the other hand, requires you to carefully analyze market trends and read charts to determine good entry points. Due to the nature of spot trading, you might be required to hold onto your Bitcoin for many years.

What Markets Can You Spot Trade Bitcoin On?

Buyers and sellers create the spot price by posting their buy and sell orders. The spot price of Bitcoin may change by the second if an outstanding order gets filled and new ones enter the cryptocurrency markets. Cryptocurrency spot markets are available over-the-counter, peer-to-peer, and on centralized and decentralized exchanges.

• _ OTC _ - Trades occur directly between a buyer and a seller without a broker. OTC markets don’t have physical locations, meaning that trading is conducted electronically. They’re less transparent compared to exchanges and subject to fewer regulations. Trading Bitcoin is often more affordable because the price isn’t disclosed to third parties.
• _ P2P _ - Traders can exchange Bitcoin among themselves, so there’s no involvement of third parties or intermediaries. You have more control over your trading activities, i.e., choosing sellers, settlement time, pricing, and so on.
• _ CEXs _ - A CEX serves as a custodian, managing the traded Bitcoin. Spot traders have info about the amount of Bitcoin available for sale and the demand for it in the market. To begin trading, deposit fiat or cryptocurrency into your account. CEXs offer extra functionalities, so spot trading involves transaction fees.
• _ DEXs _ – There are no intermediaries involved in DEXs, so the matching of buyers and sellers is matched through blockchain technology using smart contracts. The traded Bitcoin isn’t held in custody, so you can retain full ownership. Spot prices can change every minute or milliseconds.

To find a good spot trading opportunity, follow the news and be up to date with economic events while also keeping a sharp lookout for target price levels using technical and fundamental analysis.

Some Of The Significant Benefits of Spot Trading in Crypto

If eligible, you can extend the margin to expedite your ability to enter into spot purchases and sales of cryptocurrencies with the use of leverage. Suppose you use a spot exchange without the use of a margin. In that case, you must have an adequate balance to exchange dollars for Bitcoin or the other way around. For other types of orders, a simple order form is enough. The lack of margin in spot trading can protect you from losing more capital than you want to, but it’s best to create a risk mitigation plan. Safety first.

Spot trading allows you to invest in Bitcoin directly, so you can use it for various purposes, including as collateral to borrow money or earn interest in decentralized lending pools. You can hold cryptocurrency and find a better deal if you’re not happy with the current prices and terms. If your investment has shot up in value, think about selling a portion of it (e.g., what you originally invested). Bitcoin is an incredibly volatile investment, so if your profits are disappearing, you should sell your Bitcoin to hedge against potential losses in the future.

When trading other instruments like derivatives or futures, there are several factors influencing price, of which mention can be made of time, so spot trading is easy to use, especially if you’re new to Bitcoin trading. You can trade cryptocurrency much like you trade stocks in a brokerage account. Nevertheless, there’s no need to worry about interest payments or maintenance margins, so you can acquire Bitcoin now and forget about it for years, coming back to sizable profits. Attention needs to be paid to the fact there’s always a risk Bitcoin’s market price will change at the time the order is executed, as spot prices are updated in real-time.

The Bottom Line

All in all, it’s important for beginners and advanced traders alike to get a good understanding of the dynamics of the spot markets to make the best possible choices. You can attach stops and limits to your open positions, as it helps you mitigate risk by minimizing losses and securing profits if there are large movements in the cryptocurrency market. It might take a couple of days for the transaction to process, but it’s otherwise regarded as one of the fastest possible trades. As discussed earlier, the trades can be decentralized, without intermediaries, or take place on publicly traded exchanges that provide a small measure of comfort.

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Please note that the Content may have been generated with the Help of AI. The editorial content of OriginStamp AG does not constitute a recommendation for investment or purchase advice. In principle, an investment can also lead to a total loss. Therefore, please seek advice before making an investment decision.