- november 10, 2020
- 5 Comments
- Sofian Houasnia
The Diffrence Between Crypto Trading & Forex Trading.
People rarely view Bitcoin and other cryptocurrencies as currencies when they invest in them. Most investors and market participants alike treat cryptos like securities such as common stocks. But the fact of the matter is that to buy any cryptocurrency, you have to trade it versus another currency — fiat or crypto — . Because of this need, many forex brokers have started offering cryptocurrency services to their forex trading crowd. The following sections spell out some similarities and differences between the forex and the crypto markets.
Despite a few similarities, comparing forex with cryptocurrencies is like comparing apples and oranges. They’re two different financial instruments and require a different type of approach when you’re developing investment strategies around them.
One of the key similarities between forex and cryptocurrency trading is that they both carry a huge amount of risk. If you choose to trade cryptocurrencies on a short-term basis versus other digital or fiat currencies, you may need to study their price actions by using the technical analysis methods. However, as the cryptocurrency market becomes more mainstream, you can expect its movement to become more predictable. The crazy amount of day-to-day volatility can also be viewed as a similarity. Day traders may benefit from the price fluctuations in both markets. In most cases, liquidity is high enough for major cryptocurrencies and forex pairs to make it easy for trading orders to go through pretty easily.
Now this point is a lot easier to write about! Here are some of the main differences between the forex and cryptocurrency markets:
The forex market is by far the largest market in the world, and no crypto, no matter how large its market cap is, comes even close to forex. To give you an idea, the forex market has a daily trading volume of around $5 trillion USD. The cryptocurrency market, on the other hand, has a daily volume close to that of the New York Stock Exchange at around $50 billion USD. It’s not bad, but forex is the clear winner. The fact that the forex market is ultra large doesn’t mean you can make more profit in it. If anything, the daily fluctuations make it riskier and harder to predict.
You can choose from a ton of cryptocurrencies, but only seven major fiat currencies are actively traded. This range makes the choosing part easier for forex traders, while you have to analyze hundreds of cryptos to find yourself a catch. Head to the earlier section “Examining the Euro and Other Major Currencies” for more on the seven most popular fiat options.
Forex is more suitable for day traders. Although short-term trading isn’t exactly my cup of tea, most forex traders get in and out of positions a lot more quickly than any other types of investors. By contrast, most crypto investors hold on to their assets for longer period of times.
supply: Money supply is perhaps the key difference between forex and crypto. A country’s central bank plays a massive role in determining its major currency’s future. But Bitcoin and other cryptocurrencies are products of the blockchain industry; they aren’t regulated by a central bank. So the fundamental analysis is entirely different for forex and cryptocurrencies.