In the fast-paced world of cryptocurrencies, investors are constantly looking for the safest and most profitable strategies. Among the most prominent of these strategies that have attracted great interest are investing in the spot market and avoiding the futures market. In this article, we will discuss the reasons why investing in spot is a safer and more stable option compared to futures, and we will review the risks associated with each.
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What is Spot Market?
Spot markets are markets where cryptocurrencies are bought and sold directly for fiat or other cryptocurrencies. This type of investment is based on physical ownership of the assets, as the currency is transferred to the investorâs wallet as soon as the transaction is executed. For example, when you buy Bitcoin on a spot market, you own it directly with no additional future obligations.
Advantages of immediate investment:
1. Physical ownership: The investor gets the asset directly and can store it in his portfolio.
2. Less risk: Spot investing is less risky compared to futures, as it does not require high leverage.
3. Greater control: The investor can hold or sell the currency at any time based on his personal strategy.
4. Reduced stress: There are no risks of immediate liquidation as in future, which reduces stress.
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What is Futures Market?
Unlike spot, trading in futures markets is based on betting on price movements without having to own the asset itself. Investors in these markets buy or sell futures contracts that reflect their expectations about price movement over a specific period of time.
Future risks:
1. High leverage: Futures provide an opportunity to make huge profits, but at the same time they increase the possibility of rapid loss, and may lead to the liquidation of the account.
2. Liquidation risk: If the price moves unexpectedly, the investor may lose all of his capital as a result of forced liquidation.
3. High volatility: Futures markets are characterized by high volatility, which makes it more difficult to accurately predict price movements.
4. Negative psychological impact: The pressures associated with monitoring the market around the clock make futures trading psychologically stressful.
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Why is instant preferred over future?
1. Long-term investment: Spot is suitable for investors who prefer long-term investment, as they are not affected by momentary market fluctuations.
2. Control over assets: In the immediate, the investor has high flexibility in managing his assets and holding them for a long period without time pressures.
3. Avoid the risks associated with leverage: The lack of leverage makes spot a less risky option, as the entire capital is not exposed to high risks.
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How to start investing in forex?
1. Choose a reliable platform: such as Binance or Coinbase that offers spot markets.
2. Analyze digital assets: Conduct technical and fundamental analysis to determine the best currencies to invest in.
3. Portfolio diversification: It is better to spread your capital across several currencies to reduce risks.
4. Secure Storage: Use cold wallets to protect your assets from hacks.
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Tips to avoid futures:
1. Start with small amounts in the spot: to learn how to deal with the market gradually.
2. Don't be tempted: Although futures may promise huge profits, their risks outweigh their benefits.
3. Adopt a clear investment strategy: Determine your time goals and the amount of risk you can tolerate.
conclusion:
In the world of cryptocurrencies, investing in spot markets is a more stable and less risky option for investors, especially for beginners or those seeking long-term investment. On the other hand, trading in futures requires a high level of expertise, and may expose investors to significant risks due to leverage and market volatility. Therefore, it is advisable to focus on spot investing as a safe option, while staying away from futures to avoid potential losses and achieve sustainable financial stability.
