2023-10-30 12:44:57The cryptocurrency market offers a variety of ways to trade assets, and as a beginner, it's essential to understand the basics of two common methods:
i) Spot Trading
ii) Spot Margin Trading
In this article, we'll break down these two approaches in a beginner-friendly way, helping you grasp the key differences and guiding you to determine which method might be the most suitable for you.
What are Spot and Spot Margin Trading?
Spot Trading
Spot trading is similar to buying and selling in the real world. When you engage in Spot trading, you're directly buying or selling the actual asset, like Bitcoin or Ethereum, at its current market price. This involves a direct exchange of two (2) assets between buyer and seller, granting you immediate ownership of the assets. Here's what you need to know:
- Immediate Exchange: You get the actual assets right away.
- Ownership: You possess the asset, and it can be stored in your wallet.
- No Leverage: You utilize your own assets to trade without employing leverage.
Spot Margin Trading
Spot Margin trading adds a variation to Spot trading by allowing you to borrow funds from the platform to make bigger trades. Here's how it differs:
- Leverage: You can buy or sell more assets by borrowing funds from the platform.
- Collateral: You will need to have other margin assets as collateral to secure your borrowing.
- Ownership: While you retain ownership of the asset, there's a liquidation risk if things take a downturn, such as when your loan-to-value ratio becomes too high.
Comparison Between Spot and Spot Margin Trading
|
Spot Trading |
Spot Margin Trading | |
|
Market |
Spot Market |
Spot Market |
|
Expiration Date |
N/A |
N/A |
|
Trading Fee |
Spot Trading Fee |
2. Interest charged on borrowed amount 3. Repayment handling fee if auto repayment is triggered. |
|
Leverage |
Leverage is not supported. To acquire assets worth 100 USDT,you need to possess 100 USDT in your account. |
Leverage enables you to use X times the funds you currently have to buy or sell. For instance, with 10x leverage and 10 USDT, you can purchase an asset worth up to 100 USDT. Deducting the 10 USDT you already have, you can borrow 90 USDT from the platform (excluding other factors). |
|
Maximum Leverage |
N/A |
10x |
|
Borrowing |
Not Supported |
Users can borrow funds from the platform and calculate interest for the next hour. |
|
Collateral |
N/A |
Needs to have sufficient margin assets as the collateral for repayment to avoid being liquidated. |
|
Source of Profit |
You benefit from capital appreciation as the value of your cryptocurrency rises over time. |
You can borrow from the platform to buy or sell an asset even if you do not own it, as long as you have sufficient margin assets as collateral. For more details, please visit here. |
|
Liquidation Risk |
No |
Yes |
|
Liquidation Indicator |
N/A |
For Standard Account: Liquidation is triggered when the Loan-to-Value (LTV) ratio reaches 95%. For UTA: Liquidation occurs when the Maintenance Margin Ratio (MMR%) reaches 100%. |
|
What will happen when liquidation triggers? |
N/A |
The system will auto-repay all your borrowed amount and interest with your margin assets. |
Yes
No