Definition
A spot market organizes trading in assets themselves, rather than contracts whose settlement is scheduled for a later expiry. The word “spot” describes the settlement arrangement, not a guarantee that the quoted price is available for every quantity. Crypto spot markets can operate on centralized exchanges, decentralized protocols, or through direct over-the-counter transactions.
How It Works
On an order-book venue, bids show proposed buying prices and asks show proposed selling prices. The best bid and best ask define the displayed spread. Transactions occur when compatible instructions meet; the most recent completed trade becomes the last traded price. A liquidity-pool market instead calculates swap prices under its protocol’s rules.
Each trading pair has its own liquidity and quotation unit. ETH/USDT quotes ETH in USDT, while ETH/BTC quotes it in BTC. Prices need not be identical across venues because available inventory, demand, fees, and transfer conditions differ. A published spot index may therefore combine several markets rather than represent one executable order.
Key Considerations
A narrow spread does not prove that a large trade can execute near the displayed price: depth also matters. Trading can remain available around the clock while maintenance or withdrawal restrictions interrupt particular services. Derivatives prices may reference spot markets, but owning a derivative is not the same as buying the underlying spot asset.