Spot or futures: how they differ
On an exchange, the same Bitcoin can be traded in two very different ways. On spot you buy the coin; in futures you enter a contract that tracks its price. It looks like a detail and it changes everything: what you can lose, what you pay and what you actually hold.
By Bárbara Ruiz·Updated ·3 min read
Spot: you buy the coin
Trading on spot means buying and selling the coin at the current price. If you buy 0.01 BTC, you have 0.01 BTC: you can keep it on the exchange, withdraw it to your own wallet or sell it whenever you like. If it drops 30%, your balance is worth 30% less, but you still have the same coins and nobody closes your position.
Futures: you trade the price
In futures you don’t buy the coin: you open a contract whose value tracks its price. In crypto, almost all the volume goes to perpetual futures, which never expire. They allow three things that spot doesn’t:
- Going short and making money if the price falls.
- Using leverage to open a position larger than your margin.
- Hedging a spot portfolio against a drop.
The trade-off: liquidation and the funding rate come into play.
The differences, side by side
On spot you buy the coin and it’s yours: you can withdraw it and, at worst, you lose what you paid. In perpetual futures you hold a contract, not the coin: you can profit if the price falls and use leverage, but you pay funding and can be liquidated before it reaches zero.
| Spot | Perpetual futures | |
|---|---|---|
| Do you own the coin? | Yes | No, you hold a contract |
| Can you withdraw it to your wallet? | Yes | No |
| Profit if the price falls | No | Yes, with a short |
| Leverage | No | Yes |
| Liquidation | No | Yes |
| Funding rate | No | Yes, every few hours |
| Worst case | The coin goes to zero | You lose the margin sooner, through liquidation |
The fees aren’t the same
Exchanges usually charge different fees on spot and in futures, and in both cases they distinguish between maker and taker orders. In futures, the fee is also charged on the full position size, leverage included. More detail in maker and taker fees.
What’s worth understanding first
Where to trade depends on each person’s situation, and the decision is yours. What is clear is that futures add pieces that don’t exist on spot, and it’s worth understanding each one before using it: the liquidation price, the position size and the stop loss. If you can’t work out where you would be liquidated before you open, it isn’t time to open yet.
Frequently asked questions
What is spot trading?
Buying and selling cryptocurrencies at the current price and receiving the coin. It’s what you do when you buy Bitcoin on an exchange without leverage.
Are futures riskier than spot?
They carry risks that spot doesn’t: liquidation, leverage and funding. With leverage you can lose your margin on moves that on spot would only be a temporary dip.
What are perpetual futures?
Futures contracts with no expiry date. They stay close to the spot price thanks to the funding rate, which longs and shorts pay each other.