Crypto Spot Trading: Prices, Order Execution, and Venue Types
Summary
The document explains spot trading as an exchange of cash or another asset for prompt delivery. It distinguishes spot transactions from futures, where settlement occurs later, and from margin trading, which uses borrowed funds and can magnify both gains and losses. A BTC purchase example shows how a price rise or fall changes the value of a position. It also notes that market orders may fill at multiple prices when available liquidity is insufficient at the quoted price.
The article surveys OTC, peer-to-peer, centralized exchange, and decentralized exchange venues. It describes differences in intermediation, order matching, custody, privacy, liquidity, and transaction costs, including the role of automated market makers on DEXs. These are introductory explanations rather than a trading system or comparative performance study. Venue characteristics vary, and the article gives no systematic evidence for its broad claims about relative safety, costs, or ease of use.
Key ideas
- Spot trades exchange assets for prompt delivery at the prevailing market price.
- A market order may execute across several prices when liquidity at the best quote is limited.
- Futures settle at a later date, while margin trading adds borrowed funds and magnifies risk.
- OTC, P2P, centralized exchanges, and decentralized exchanges differ in how they match and settle trades.
- DEX users may trade through automated market makers, while centralized exchanges commonly use order books.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.