This article only explains the difference between encrypted asset spot transactions and Futures transactions, where Futures transactions refer to perpetual contracts in a narrow sense.

What is spot trading?

Spot trading refers to buying or selling cryptocurrencies in the form of instant settlement, realizing the exchange between two different cryptocurrencies, and actually holding cryptocurrencies.

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What is a Futures trading?

Futures trading essentially trades not cryptocurrencies themselves, but contracts that represent cryptocurrencies. Holding a contract means buying or selling the underlying cryptocurrency at some point in the future.

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The difference between Futures trading and spot trading

1. Leverage

Spot transactions have the nature of equivalence, and the transaction funds are equivalent to the subject matter of the transaction.

Futures trading has the nature of leverage, which can enlarge the principal for trading and has capital benefits.

For example, the current price of BTC is 45,000 USDT, and 45,000 USDT is required to buy 1 BTC in the spot market; while in the Futures market, you can buy 1 BTC with a margin of 450 USDT by opening 100 times leverage.

Please note that while using leverage in Futures transactions to increase capital utilization and returns, transaction risks will also increase.

2. Long-short two-way trading

Spot trading can only be unilaterally purchased, and only the price of holding assets can increase to obtain income.

Futures trading supports two-way opening of long and short positions, which can be obtained by predicting price rises and long positions, or by predicting price declines and short positions.

Therefore, investors usually choose Futures transactions to hedge the risk of price fluctuations in the spot market to ensure the value of assets, or directly obtain income from fluctuations in Futures market prices.

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