Spot Vs. Leveraged Crypto Trading, Which Is Better?

The cryptocurrency market has come a long way in a short span. The fast growth has made the industry a force to reckon with in the financial sector. Today the space is a trillion-dollar market which is incredible given the first digital currency was launched some 12 years ago. There are several reasons why the crypto market is growing at a breath-taking pace, including; realization that the sector is the future of money and growing recognition by retail and institutional investors as an asset class—one with incredible returns. 

For example, the ROI of Bitcoin, Ethereum, Binance Coin, Solana, and Cardano is 34,896% 131,782%, 452,499%, 79,172%, and 6,143%, respectively as of the time of creating this piece. These are returns you will struggle to see outside crypto, and some of these projects are not that old. All one needs to see to enjoy these returns is to purchase a specific asset and hold on to it. However, it is possible to make much more by margin trading cryptocurrency. This piece seeks to understand which trading style is better for maximum gains within a given period.

Spot Trading

This happens on spot markets that allow users to access the actual asset. Mostly they come in the form of cryptocurrency exchanges. Initially, you will have to identify the asset you would like to put your money in. This will require some research on your side since there are over 16,000 tokens within the market today. Also, most of these tokens are useless since they don’t offer anything special other than being cheap imitations of other quality projects looking to cash in quickly. A good project is judged by its utility. If you come across a project that doesn’t offer any utility, you have no business putting your hard-earned money into it. Also, it might offer utility, but is it providing a solution that exists within the market? In that case, there is no need for it. You need to answer this question before putting money into the project. Also, it’s good to find out what experts and the cryptocurrency community thinks of the project. This way, you will increase your chances of success with the asset you pick. Remember, spot markets offer access to the actual asset. And the only way you will be accessing the incredible returns like the ones mentioned earlier is by holding on to the asset for years. Imagine putting money on a useless project. You will lose whatever you have invested. And many have witnessed their investments go to zero over the years instead of the other way up.

Also, buying on the spot market requires finding a secure private wallet to store the private keys of your tokens. In case the platform is hacked, your funds will be safe.

Spot markets trading can be profitable but requires patience for weeks, months, and even years.

Leverage Trading

Some exchanges will offer this ability as well as brokers such as PrimeXBT. These platforms will allow users to trade contracts for difference (CFDs) which are financial instruments that are attached to the actual asset. The good thing about this form of trading is that you only need to open an account with a platform that offers access to the asset you would like to trade and fund it with fiat money, and you are good to go. You don’t have to worry about safekeeping the asset. Also, it is possible to profit from the market if the asset goes up or down, something that isn’t possible with spot markets. And most incredibly, you get to trade with leverage. This boosts your capital, thus increasing your profitability.

All in all, both spot and leverage trading are legit ways to make money off the crypto market. However, one requires more patience and the ability to securely guard your assets against hackers. On the other hand, you get to see gains quickly using leverage trading, but it’s not that easy. You need to educate yourself on conducting technical and fundamental analysis. Also, learn proper risk management. Luckily platforms such as PrimeXBT will offer you plenty of free educational resources to use.

Fry Electronics Team

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