Understanding spot wallets and the main types of cryptocurrency trading

If you’re just starting out in the cryptocurrency universe, you’ve probably come across terms like “spot wallet,” “margin,” and “futures.” The good news is that these concepts, although they may seem complex, follow simple logic that any beginner can master. Let’s explore how each trading method works and which one best fits your investor profile.

What is a spot wallet in direct trading

Spot trading is the simplest and most direct way to buy and sell cryptocurrencies. When you trade in this mode, you’re making an immediate transaction: you pay and receive the actual asset at that moment. It’s like buying Bitcoin or Ethereum in a physical store, but happening in the digital world.

In this type of operation, you use only your own financial resources. If you want to buy R$ 1,000 worth of Bitcoin, you need to have exactly R$ 1,000 in your spot wallet. The transaction is directly between buyer and seller, and you become the owner of the asset immediately, able to store it in your digital wallet and fully control it.

Key features include:

• Immediate ownership of the asset: you receive the cryptocurrencies as soon as the purchase is confirmed
• No leverage: operations are conducted with your own capital
• Greater security: since you own the assets, there’s no liquidation risk
• Lower complexity: ideal for beginners

How margin trading works

Now, imagine you want to buy more assets but don’t have the full required capital. That’s where spot margin trading comes in. This mode allows you to borrow funds from the platform to expand your operations, using your own assets as collateral for the loan.

For example, if you have R$ 100 and want to make a R$ 1,000 trade, you can request a R$ 900 loan. In exchange, the platform will require your initial R$ 100 to be held as collateral. If the cryptocurrency’s value drops sharply and your collateral becomes insufficient to cover the loan, the system can automatically liquidate your position, converting your assets into USDT or another stablecoin to settle the debt.

Important points to consider:

• Leverage available: usually up to 10 times your initial margin
• Loan cost: besides the standard trading fee, you pay interest on the borrowed amount
• Liquidation risk: if the maintenance margin reaches 100%, you lose your collateral
• Intermediate strategy: riskier than spot but less extreme than futures

Futures and perpetual contracts: speculation or hedging

Futures contracts work completely differently. Instead of buying the actual asset, you trade contracts that represent the future price of Bitcoin, Ethereum, or other cryptocurrencies. You do not own the underlying assets, only price agreements with a set expiration date.

These contracts allow significant leverage, ranging from 25 to 125 times depending on the trading pair. With just R$ 100 of initial margin and 10x leverage, you can control a position of R$ 1,000. This amplifies both gains and losses.

There are two main types:

• Futures contracts with expiration: have a set date (daily, weekly, quarterly) and require you to close the position by that date
• Perpetual contracts: have no expiration date and can be held indefinitely, as long as you maintain the required margin

Liquidation also occurs in these markets if you do not maintain the minimum required margin. These contracts are ideal for short-term speculation and also as a hedging instrument against extreme volatility.

Which mode to choose to start

The decision depends on your profile and goals. If you’re a complete beginner and want to understand how cryptocurrencies work, start with spot trading using a spot wallet. You gain real experience, control your actual assets, and avoid liquidation risk.

As you gain knowledge in technical analysis and risk management, you can explore margin trading with low leverage (2x to 3x at most). Futures should be reserved for when you fully master the previous two modes and deeply understand the risk mechanisms.

Remember: in cryptocurrencies, starting slow with a spot wallet is always the wisest strategy. Leverage can multiply gains but can also wipe out your entire holdings in seconds.