Before answering this question, keep reading this article to find out which one can give you the most benefits.
Any investor who wants to start trading online in the financial markets will first need a trading account and a computer connected to the Internet, be it a smartphone, a laptop, or a tablet.
Forex trading does not require very advanced technology. However, if you want to be a trader in the world of cryptocurrencies, you will need to have better equipment.
Those traders who already understand the basics of crypto trading will find the transition to forex trading easy. However, forex traders will take a little longer to understand crypto trading.
Both markets are determined by the balance between supply and demand, however, the principles governing it are very different between the two trading methods.
Also, Forex there are fundamental variables such as monetary policy, inflation, financial regulations, global growth, and all the factors that affect a given currency or economy.
However, at the crypto trading level, things change. A Twitter message, a personal opinion, a new financial regulation, or some news can drastically influence the price of a crypto asset.
Online Markets as a Financial Option
Each of these two financial instruments (currencies and crypto assets) has its advantages and also risk considerations when we want to invest in them.
The important thing is that before investing money in the market, we always have the knowledge and experience to do so.
Despite the commonalities between forex and cryptocurrencies, there are some key features to consider for each of them:
Financial Instruments
Forex traders generally focus on major currency pairs such as the euro, dollar, yen, pound sterling, Swiss franc, and Australian dollar among many other currencies. Some traders also choose to trade exotic or unusual currency pairs.
On the other hand, with over 11,000 different cryptocurrencies and this growing market, cryptocurrency trading is a completely different universe. But while most trade Bitcoin or Ethereum, cryptocurrency enthusiasts can dabble in lesser-known digital assets. This means that it is not feasible to track all cryptocurrencies, so most investors simply choose a few digital assets to narrow down their list.
Market Liquidity
With a trading volume of over $6 trillion, the Forex market is highly liquid. This allows you to easily buy or sell your chosen instrument regardless of the size of your position.
However, this is not true for most cryptocurrencies, as the total market capitalization of the cryptocurrency market currently hovers around $2 trillion, with Bitcoin accounting for the lion's share of this market capitalization.
As such, other cryptocurrencies are less actively traded compared to Bitcoin, making it difficult for traders to exit the trade at the desired price.
As there is a wide variety of cryptocurrencies, the differences between each cryptocurrency can be huge. If you are interested in trading lesser-known cryptocurrencies, you will always need to take the time to study their fundamental characteristics.
Market Volatility
When it comes to volatility, cryptocurrencies can be very volatile, while forex markets tend to be more stable and predictive.
The number one cryptocurrency, Bitcoin, started the year at $29,000 and climbed to the $66,000 level before pulling back again and reaching the current $60,000. Also, smaller cryptocurrencies are known to be highly volatile over short periods.
This is different in forex markets. Extreme volatility usually only occurs in so-called exotic pairs. This makes risk management much easier in currencies compared to cryptocurrencies.
Forex vs Crypto Trading Hours
The cryptocurrency market is open 24 hours a day, 7 days a week. The forex market is also open 24 hours a day but can only be traded Monday through Friday.
Forex traders can spend their weekends relaxing, while cryptocurrency traders must be in constant contact with the markets, as weekends are usually when cryptocurrencies make big moves.
Forex trading is driven by large global financial institutions. This leads to forex market activities following a regular pattern that we can see and follow. Cryptocurrency markets are driven by individual traders or small investment firms rather than established institutions.
Security risks
Cryptocurrency markets are still relatively new. Many regulations are still being developed around the world. That means cryptocurrency traders could face high risks of scams and account hacking.
In contrast, the forex trading industry is well regulated around the world and therefore faces fewer risks. However, Forex traders should always carefully observe their broker and the regulations of the country where it is registered.
What Is the Profit Potential of Forex vs Crypto?
With great opportunities for high profits, crypto markets are gaining popularity among investors. However, with greater profit potential comes greater risk, so traders should always be on the lookout for this. However, Forex traders can maximize their profit potential by using leverage. Likewise, Forex moves less and so we have cheaper trading conditions, while in cryptocurrencies the market sets the right price, in terms of high spread.
In summary, we can say that if we think of Forex vs Crypto in terms of performance and profits, both allow us to have great benefits. Everything will always depend on the financial objectives, the available capital, the trading style, and the demands of each trader. Try cryptocurrency and forex trading with minimal accounts to see which one fits the trader profile we want to manage.
However, we want to emphasize that whichever one you choose, you will always need a stable, secure, and great platform to start investing.
In my opinion, currency trading is safer than cryptocurrencies, and that is why I enjoy it more. However, I must confess that the world of cryptocurrencies is turning out to be interesting from a technical and fundamental analysis point of view.
The truth is that neither type of trading is simple, but both are very exciting and profitable.
Which one do you prefer between Forex vs Crypto?