What Is the Difference Between Futures and Spot?

What Are Futures and How Do They Differ from the Spot Market in Crypto?

In cryptocurrency trading, there are two main ways to trade: the spot market (spot) and futures. Both tools allow you to profit from price movements, but they work differently: on spot, you buy the actual asset and become its owner, while on futures, you trade a contract based on the price. Below, we explain the differences in simple terms and with easy examples.

What Is the Spot Market (Spot)?

The spot market is the standard way of buying and selling cryptocurrency “here and now.” You buy a coin and become its owner: it appears in your balance and can be stored, transferred to a wallet, or sold later.

Example of a Spot Trade

Suppose the price of BTC = 30,000 USDT.
You buy 1 BTC on the spot market.
1 BTC appears in your balance.
If the price rises to 35,000 USDT, you sell and make a profit of +5,000 USDT.
If the price falls to 25,000 USDT, you incur a loss of -5,000 USDT, but you still own the BTC until you decide to sell it.

Key Features of Spot Trading

On the spot market, you own the asset. There is no leverage and no liquidations.

What Are Futures in Cryptocurrency?

Futures involve trading a contract based on the price of an asset, not the asset itself. You do not buy BTC “into your wallet”; instead, you open a position and profit from price movements. The main difference is that futures allow the use of leverage and the ability to profit not only from price increases (Long), but also from price decreases (Short).

Example of a Futures Trade (Long)

Suppose BTC costs 30,000 USDT.
You open a Long position with x10 leverage and deposit 1,000 USDT.
In effect, you control a position worth 10,000 USDT.
If the price rises by 5%, your profit will be approximately 50% of your deposit.
If the price falls by 10%, you will lose your entire deposit due to liquidation.

Example of a Futures Trade (Short)

Futures allow you to profit from falling prices.
If BTC = 30,000 USDT and you open a Short position, and the price drops to 27,000 USDT — you make a profit, even though you never owned BTC.
This cannot be done on the spot market without special tools.

Key Differences Between Spot and Futures

Spot: You buy cryptocurrency and own it. There is no leverage and no liquidation. You can hold the asset for as long as you want.

Futures: You trade a price contract. You can use leverage and open both Long and Short positions.
However, there is a risk of liquidation if the price moves against your position.

TRANSFER BETWEEN THE SPOT MARKET AND THE FUTURES MARKET IS IMPOSSIBLE!!!

What Is Liquidation in Futures Trading?

Liquidation is the forced closing of a position by the exchange when losses approach the size of your margin. The higher the leverage, the smaller the price movement needed for liquidation.

Understanding Liquidation in Simple Terms

Liquidation is the moment when the exchange closes your position because the funds you deposited (margin) are no longer sufficient to cover the loss.

The easiest way to understand liquidation is by this rule:

Price movement against you (%) ≈ 100% ÷ leverage

Example with x20 Leverage (Long)

Suppose:

• BTC price = 30,000 USDT

• You opened a Long with x20 leverage

• You deposited 1,000 USDT

You effectively control a position worth 20,000 USDT.

Now imagine the price moves against you:

• Price drop of 1% → loss of 20% of your deposit

• Price drop of 5% → loss of 100% of your deposit

👉 That means if the price falls by about 5%, your position will be liquidated.

Example with x5 Leverage (Long)

Now the same example, but with lower leverage:

• BTC price = 30,000 USDT

• Long with x5 leverage

• Deposit 1,000 USDT

• Position size = 5,000 USDT

What happens if the price moves against you:

• Price drop of 1% → loss of 5% of your deposit

• Price drop of 20% → loss of 100% of your deposit

👉 With x5 leverage, the price needs to move about 20% to trigger liquidation.

Recommendation: At the beginning of your journey, use a test deposit and ONLY x1 leverage. As you gain experience, leverage may be increased up to x3 — but keep in mind that with x3 leverage, only a 33% price movement is enough for liquidation, which is quite risky!
We strongly recommend using only x1 leverage!