Crypto Trading vs. Forex Trading

Crypto Trading vs. Forex Trading

Many people believe that comparing crypto and Forex trading is like comparing apples and oranges, it may be true to some extent but that's not entirely true. In this article, we will compare crypto trading with Forex trading and see what are differences and similarities between two. 

Liquidity 

Liquidity is something that makes Forex trading so attractive to investors. Forex trading is a large, well-established practice, and has a trading volume of 5 trillion USD per day. Although currency of every country can make up the foreign exchange market, the major volume is concentrated to small number of major currencies like USD, EUR, JPY, GBP, CAD, CHF, and AUD.

Crypto market as compared to Forex is very new and has limited trading volume when compared. As of today trading volume recorded is 53 billion USD while you have many cryptocurrencies to choose BTC is considered to be the most reliable cryptocurrency from a trading perspective and has a dominance of 67%. 

Stability vs. Volatility 

While volatility is present in both trading markets, stability is mostly found in the Forex market only. Crypto trading is known for its wild swings. Take these few instances to understand the crypto volatility.

  • BTC fell 13.7 and 13.3 to its value in one day on 27 Jun and 16 Jul this year. 
  • On Dec 1, 2017, the price of bitcoin was 10,869 USD and just 17 days later it was on its "All-time high" of 18,971 USD and on Feb 07, 2018 it was 7,587 USD. Nothing in human history has seen such huge swings in price fluctuations.

Foreign currency exchange rates are relatively stable when compared to crypto. Fluctuations of large magnitudes are infrequent because of the volumes being traded.

While volatility brings a certain amount of uncertainty, it also brings opportunities for investors. The key rule is the higher the liquidity is, the lower the volatility and the risk are. Therefore, Forex trading is less risky than crypto trading but chances of making huge profits in a short period of time are in crypto trading. Remember, fortune always favors the brave.

Forex Trading Sessions vs. Crypto 24x7

The Forex market is open 24 hours a day five times a week (24/5). The Forex market has four major trading sessions the Sydney session, the Tokyo session, the London session, and, the New York session. Every trading session has its own opening and closing hours.

On the other side, crypto world does not sleep and trading continuous for 24/7. The prices of coins are changing every second.

Middleman Fee

In Forex market brokers and aggregators facilitate transactions between participants, which can often add a layer of fees. 

If you are doing peer-to-peer crypto trading then there won't be any middleman and that saves lots of money. But if you are trading on a crypto exchange like Binance then you have to pay an exchange fee for every trade you commerce. 

Security and Regulatory Compliance.

Forex is more secure, regulated and transparent as compared to crypto trading. Most Forex brokers are licensed and have to comply with regulations of the country they are working in.   

Crypto trading has serious regulatory issues due to its distributed and decentralized nature. Crypto exchanges are prone to never-ending scams and hacks. In 2014, Tokyo based world's largest BTC exchange  Mt. Gox lost around 740,000 Bitcoins (6% of all bitcoin in existence at the time) stolen by hackers, and 27.4 million USD were missing from its bank accounts, sending a shocking news to all its clients.

Conclusion 

Seeing the pros and cons of both trading markets we can't say there is any decisive winner. Trading in both markets is challenging and involves a high level of engagement. Make sure you have enough information about both trading before you jump into any one.  

"Wide diversification is only required when investors DO NOT UNDERSTAND what they are doing." Warren Buffet.

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