Being a mixture of technology, financial opportunities and business services – the investment world is attracting more and more people across the globe.
The assets one can add to their portfolio vary from art to stocks to gold, silver, and oil. Among all that, however, two investment niches stand out: forex and cryptocurrency. What are their similarities and differences, and which one to invest in? Let’s find out.
What Is Forex?
The foreign exchange market is one of the biggest financial markets. It involves the trading of currencies. Forex trading is not only about individual gains, however. It has broader implications that reflect global economies, debt levels, and other economic factors.
In 2019, the market reached an unprecedented 6.6 trillion per day. The market compromises 170 currencies and offers high liquidity. It is worth noting that currencies are traded in pairs, with EUR/USD, GBP/USD, USD/JPY and USD/CHF being the most traded pairs.
Here we should also mention that, unlike stocks that are listed on an exchange, trading forex does not take place on exchanges, so it may be a bit confusing for beginners. Of course, there are top brokers and novel platforms that can help beginners. If you register at Bitcoin-up.io, for example, you will be connected with a trusted broker to help you enter the market and tame its volatility.
What Is Cryptocurrency Trading?
Cryptocurrency trading is different from forex trading. It involves the buying and selling of virtual currencies (without any physical form) and speculating on price changes. The best part is that the crypto market never sleeps. Here we should note that the entire crypto market offers more than just payment solutions and trading opportunities. Cryptos are here to bring decentralisation and transparency and even help the unbanked globally access equal financial services. Blockchain technologies can even be implemented beyond the financial sector to boost education, medicine, and gaming.
No doubt that two of the major players remain Bitcoin, the first and most traded coin, and Ethereum, the king of smart contracts that facilitates the creation of new technology, tokens, and dApps.
Cryptocurrency trading is increasing in popularity, and there are many brokers, exchanges, and platforms that help both beginners and expert investors to master the volatility of the market. Interestingly, decentralised exchanges (DEXs) are also becoming more and more popular, offering higher liquidity and flexibility. Just make sure that the asset of your choice is regulated in your area.
Forex and Crypto Trading: Similarities
Both forex and crypto are popular investments:
One of the main similarities is that both forex trading and crypto investing are highly popular. They offer a variety of assets: forex traders can trade any fiat pair, while crypto traders can explore thousands of crypto projects. Note that there are over 1,000 cryptocurrency projects and tokens listed on CoinMarketCap.
Both markets are moved by major players:
That said, in both marketplaces, there are major players that dominate and define all trading processes. For example, investors often focus on several leading currency players, such as USD/EUR, and top cryptos, such as Bitcoin, Ripple, Ethereum, Dogecoin, Cardano, and Polkadot. Note that, as per SmartAsset, over 70% of the market is held in Bitcoin.
Crypto Vs. Forex | What Are the Differences?
Crypto is more volatile than forex:
While any investment comes with risks, one of the main differences is that the crypto sector is far more volatile than forex. We have all witnessed, for example, how DOGE jumped in value after a single tweet.
The forex market is larger than the cryptocurrency sector:
While the crypto sector is vast, despite its value of over $2 trillion, there is no doubt that the forex market is much larger. As mentioned above, forex has grown to over $6 trillion.
Forex is regulated:
Last but not least, forex is regulated compared to crypto trading. Currencies have been around for a long time, and as a result, governments have imposed regulations on them. Note that regulations aim to ensure that investors have a safe place to be.
Cryptocurrency, on the other hand, remains new. Let’s not forget that BTC was launched just a decade ago. The truth is that regulations need to catch up with technological innovations, as many believe that crypto regulations can actually benefit traders and reduce fraud.
Interestingly, many countries, such as China, have imposed draconian measures against cryptocurrency trading, while other places like El Salvador accept Bitcoin – El Salvador even proposed a design for a Bitcoin city.
Is Forex or Crypto Better for Me?
Cryptocurrency and forex trading remain popular financial ventures, but it’s only up to decide which one to choose to match your financial goals. We recommend consulting a licensed financial advisor to help you limit poor financial choices, especially if you are a beginner.
Besides, you should invest in trading education, which is a life-long learning process! Market data, technical analysis, trading signals, and new skills; there is so much to comprehend before you start trading.
No matter what you decide to invest in, remember that risks are part of the game. The markets are volatile, and success depends on numerous external factors, internal skills, timing, and even a little bit of luck. Thus, never invest borrowed capital or money you cannot afford to lose. (Investing your life savings is a big no-no.)
To establish profitable trading strategies and accept risks, you also need positive trading habits and clear financial goals. As genius Warren Buffet said, “Success in investing doesn’t correlate with IQ. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people in trouble investing.”
You should also be flexible and persistent all at the same time. To be more precise, you should always follow your strategy, but when you see it doesn’t work over a long period of time, consider changing it and adjusting your financial goals.
Forex Vs. Cryptocurrency | Conclusion
In the end, both crypto and forex trading have their pros and cons, and it’s up to you to decide which to choose. That said, let’s not forget that portfolio diversification is vital to success as it helps reduce risks and increase potentially profitable opportunities.
Enjoy your trading journey, fellow trader, but always do your due diligence!