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Forex Vs. Cryptocurrency

As many of you know, December 2017 was the hottest time for the cryptocurrency world, with the leading cryptocurrency being sold at around €20,000, and following behind it was ethereum at $1,210. However, all this excitement did not last long as 2018 came by and along with it, the huge crash of the crypto market.  

It’s been said that over 40% of crypto investors were beginners, and due to lack of experience, extremely high fluctuation and an unstable market was the outcome.

The foreign exchange market, commonly referred to as the forex market, carries the most liquid in the investing world. It works as a global market where all the currencies in the world are traded. Factors such as political announcement, inflation in numbers, and jobs reports all have big effects on this market. On the other hand, the Cryptocurrency market is less established with a shorter history, in contrast to the forex market, which is more stable and has been running since 1880 some sources say. Therefore, the forex market tends to be more popular, due to familiarity and security.

The differences between the crypto market and forex are infinite. To begin, the forex market is highly regulated all around the world and consists of the worlds global financial markets, with an unlimited amount of currencies available for trading, where on the other hand, cryptocurrency has a finite supply on how many coins can be created. In addition, forex is also known to have a higher leverage, mainly because the forex market does not run on the same fluctuation as the crypto market and therefore higher sums are needed in order to make significant returns, but mainly because one doesn’t have to invest big sums of money, rather is able to control a lot of money with a little investment. Forex trading is also known to be the most liquid market in the investing world, and its ability to buy and sell assets at the desired price without causing serious changes in the asset price. While on cryptocurrency, as one moves away from bitcoin and other big coins, there is a deep gap in terms of liquidity in the middle of the different altcoins, correspondingly, the bid and spread can be quite powerful.

We can’t forget that cryptocurrencies are highly volatile due to the unpredictability which makes the trading risky. Profits can be high one day and drop low just as quick.

Unlike forex trading, cryptocurrency trading does not involve any middleman such as a broker, but rather goes directly through a coin exchange instead. Hence, investments on the crypto market usually do not include account managers/ brokers assisting on the investor’s behalf and engaging to the trade. This can be looked at in two opposite perspectives, on one hand, you are ultimately in less risk of being involved in a scam where the account managers pocket your investment, however, one who is not familiar with the markets and the trading world may have a harder time finding someone to assist them in their trading.

When analysing the two, forex and crypto investments, they relate in that they both involve exchanging a currency for another. However, like previously mentioned, the forex market is highly regulated, whilst cryptocurrency is widely unregulating and can have several negative outcomes when it comes to the movement/transferring and especially when one as an investor handling the trades. The two main things which have an influence on one’s ability to trade are liquidity and volatility. In view of this, the forex market has been seen to be more stable and reliable, however, skilled traders will be able to trade on the cryptocurrency market with a moderate level of success.

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