Markets where a financial instrument is directly bought and sold are called spot markets. In spot markets, price formation takes place over the current price of the financial asset. In this article, you can find the answer to the question of what is the spot market.
The spot market is a market where financial products are traded instantly and through cash. Transactions that take place in the spot markets are called spot transactions. While spot transactions are taking place, buyers and sellers can only use the assets they have. No leverage or margin trading is used.
In spot market transactions realized within the body of a central authority, commissions are charged and it is aimed to secure these transactions with certain laws. In spot market transactions on cryptocurrency platforms, transactions are recorded on the blockchain. These transactions are anonymous but not confidential.
How Spot Markets Work ?
The term spot market has the same meaning in classical financial and cryptocurrency markets. Prices in the spot market are based on the current value of the relevant crypto asset. However, during the execution of orders given on cryptocurrency trading platforms, prices change instantly and the transaction price may also change depending on the type of order given.
What is the Difference Between Spot and Futures Market?
Futures, unlike spot markets, are not instantaneous. In futures trading, contracts involve payment at a future date. Buyers and sellers determine the amount for the financial asset sold and decide to pay this amount at a future date. Payment is made on the agreed date.