Cryptocurrency vs forex trading

December 03, 2018
Darya Karatkevich

One of the most time-tested and revered forms of investing is trading foreign currencies, known as forex trading. The opportunity to take advantage of geo-political changes, trade policies, and world events for large gains has drawn investors from day one.

At the same time, many people see cryptocurrency as the future of money, with less restrictions placed by central organization — be it banks or government — holding the currency back from being traded and accepted globally. A massive competition is underway to be the ‘one to beat’ in a field of almost 2,000 actively traded cryptocurrencies.

Like fiat currencies, you can buy and sell cryptocurrency, and many do just that. There are many similarities between investing by trading fiat currency and crypto, but also some key differences. If you’re experienced with forex, we’ll go over the benefits of cryptocurrency vs forex trading.

Higher risk, higher reward

risk reward

First and foremost, there’s definitely more risk with trading cryptocurrency versus foreign exchange trading. Barring drastic geo-political changes or crisis, fiat currency is quite stable. If you follow world events, you can usually predict the path for a given currency based on the moves of governments and businesses within the countries in question.

With cryptocurrency, there has been much more drastic price fluctuations, but as any investor learns — where the risk is higher, so is the potential gain. Learning about and trading cryptocurrency can have a much larger financial upside than trading foreign currency.

The current bear market of crypto prices is seen by many as a great time to enter. Some of the top cryptocurrencies with established payment networks and millions in market capitalization are at two-year lows, with most industry experts expecting a full recovery.

More options

more options

With thousands of actively traded cryptocurrencies, there’s an almost infinite number of trading pairs. This provides you with many more options than trading among a handful of fiat currencies. As with standard forex trading, there are prime currencies such as bitcoin (BTC), Ethereum (ETH), and Ripple (XRP), and many other smaller and less popular options.

Unlike with forex trading, those less popular options are often the next industry star. Nobody is looking at a small country and thinking their currency might be the next USD or Euro, but if a new player in the cryptocurrency space gets traction with a better technological and user solution than the others, it can quickly jump to the front of the class.

Some people even trade between both crypto and forex, by buying based on bitcoin to dollar and selling based on bitcoin price to another currency. Now, there are even ‘stablecoins’ which are pegged to fiat currencies and designed as a holding place between crypto trades.

Market never closes


As opposed to the forex markets, which are only available during business hours and only during weekdays, the cryptocurrency market is available 24/7. 

Often with forex trades, you’re essentially making a futures trade by taking a position while your home market is open and the foreign market is closed. Unlike this, many cryptocurrency exchanges can execute trades in minutes, sometimes seconds.

Regulation is sparse but coming

decentralized world

Only recently, there’s been a push to start regulating the cryptocurrency industry, meaning that currently there’re still fewer restrictions on trading it than with fiat currency. Even after more regulations are created and adopted worldwide, there is a limit to what authorities can control. Without a central bank or government issuance, cryptocurrencies are created, controlled, and owned by their users.

It is this decentralized digital model that makes the idea of cryptocurrency so attractive. That’s why so many are investing in what they believe to be the best up-and-coming solutions. However, doing your research and staying abreast of new government regulatory actions in the crypto sphere is still critical if you want to be successful trading it.

Supply and demand

demand supply

Unlike fiat currency, most cryptocurrencies have built hard-caps in their circulation, meaning that there is a known supply in the long term. On the contrary, governments can issue new currency at will, meaning that in some ways cryptocurrency can eventually have less volatility than fiat currency.

Demand is usually driven by the usefulness of a digital currency. The more places you can use it, trade it, exchange it, or store it — the more valuable it’s likely to be. The most valuable cryptocurrency, bitcoin, has been on the market the longest and therefore is accepted at more places. But as other currencies catch up and accelerate transaction times or solve critical business cases in the quest to become the best cryptocurrency, they will be grabbing a bigger market share.

Once all of a certain currency has been mined, the process of receiving small amounts of currency in exchange for using your computing power to store the ledger information, it will be immune to monetary inflation or deflation. Volatility today will give way to stability in the future.

Taking control of your trading accounts

fund control

Forex remains one of the most traded financial instruments worldwide, often averaging close to $2 trillion per day in volume. By contrast, the daily volume for crypto trading averages around $20 billion, only a fraction of the forex market.

Instead of using a broker, like you would with forex trading,  your cryptocurrency will be traded in an online exchange. There are many to choose from, and they often have different trading pairs available. The key, however, is that you’ll be in control of which one you use, and often the fees are extremely low compared to forex trading fees.

Keeping in mind that any investment carries risk, and the more time you spend researching and understanding a market, the more likely your success rate is — trading cryptocurrency is posed to offer new benefits over traditional forex trading.

Post written by Darya Karatkevich
Darya is a blockchain market observer with 5+ years of experience as an author and editor for major tech blogging platforms. Her fortes are blockchain technologies and solutions, cryptocurrencies and crypto-related regulations.

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