There are many differences between crypto and forex trading, there are a lot of similarities between them both. Keep reading to learn what are the differences between crypto and forex trading.
We will be discussing something that many people who are looking for ways to make extra money in Crypto or who are looking to improve their skills to become a trader are asking. Some may argue that comparing cryptocurrency trading with forex trading is like comparing apples to oranges but you will soon see for yourself that’s not necessarily the case.
Similarities and Differences Between Crypto and Forex Trading
Crypto trading involves trading currencies just like FOREX trading does. However, the forex market is a lot larger as it has a daily transaction value of $6.6 trillion and has been around since the 1970s compared to the Crypto market that began around 2009 and has a daily transaction volume of $121 billion, which is still huge but has nothing on fiat trading. Could this change in the future?
Forex markets involve middlemen, brokers and various other institutions that collect trading fees at almost every step of your trading process. However, in crypto trading, you have the option to skip the middleman or trade with an exchange that is just a layered middle man for the actual transaction fee and this is one of the biggest attractions to trading crypto for many traders, although, the fee can be sometimes higher than forex and the upside potential from a good long or short position can be a lot more lucrative.
Another difference that has to be pointed out is the liquidity available in forex at the moment and this is a lot more than in crypto markets, once you try to buy and sell a coin that is not one of the major cryptocurrency coins.
If you are here and wondering which type of trading to start with, this blog post might help you get a little better understanding of which one you would like to get into. Let’s take a look at both cryptocurrency trading and forex trading. Let’s get started.
Cryptocurrency Trading Landscape
Crypto trading involves trading currencies just like FOREX trading does. However, the forex market is a lot larger as it has a daily transaction value of $6.6 trillion and has been around since the 1970s compared to the Crypto market that began around 2009 and has a daily transaction volume of $121 billion, which is still huge but has nothing on fiat trading. Could this change in the future?
Forex markets involve middlemen, brokers and various other institutions that collect trading fees at almost every step of your trading process. However, in crypto trading, you have the option to skip the middleman or trade with an exchange that is just a layered middle man for the actual transaction fee and this is one of the biggest attractions to trading crypto for many traders, although, the fee can be sometimes higher than forex and the upside potential from a good long or short position can be a lot more lucrative.
Another difference that has to be pointed out is the liquidity available in forex at the moment and this is a lot more than in crypto markets, once you try to buy and sell a coin that is not one of the major cryptocurrency coins.
If you are here and wondering which type of trading to start with, this blog post might help you get a little better understanding of which one you would like to get into. Let’s take a look at both cryptocurrency trading and forex trading. Let’s get started.
Cryptocurrencies are still relatively new in the financial world. And there are many ways to get involved. Bitcoin was the first cryptocurrency to be created back in 2009, and in eleven years, it has increased in value considerably, and many other crypto coins have made it onto the scene since like Ethereum, Litecoin, Ripple and even the famous Meme Coin, Dogecoin, however, despite all these rival currencies, Bitcoin remains the main coin to dominate in the crypto world and even the news headlines.
The main role of cryptocurrencies as digital assets is to be a decentralized mechanism for (P2P) peer-to-peer transactions. As one of the main key features of crypto is its independence from central banks and governments, it soon becomes an alternative source of funds for many. Many people and businesses use crypto for paying for services and products and also use coins such as Bitcoin as a store of value like gold. Many people have also turned to trade crypto much like FOREX although crypto has attracted a new kind of trader, mostly newbies with less of an understanding of how to trade profitably.
Cryptocurrency markets are open 24 hours a day 7 days a week and you will find that they are extremely volatile compared to traditional FOREX trading markets. A lot of cryptocurrency traders have started using crypto trading bots to help them manage this volatility and reduce risk. We will get into crypto bots later. Or click here to jump to that section.
To date, there have been over 65 million crypto wallets created and there have been more than 6000 cryptocurrencies in existence.
It would be interesting to know if there are still people in this world that have not heard of Bitcoin as it is the cryptocurrency to keep an eye on. However, there are many other good crypto alternatives. This is where the term Altcoin comes from. An Altcoin is a cryptocurrency other than Bitcoin.
Here is a list of 5 other cryptocurrencies to look out for if you want to invest or trade with:
- Ethereum
- BNB
- Polkadot
- Chainlink
- Cardano
Let's look at the differences between investing in crypto and trading cryptocurrencies.
You have probably had friends or family members say ‘I am going to invest in Bitcoin’ at some point or another. Once they decide they are going to invest in a cryptocurrency it usually means they are buying that coin for the long term, Bitcoin or Ethereum for example.
These crypto investors believe that the price of the coin is going to go up, and will stick through the ups and downs of the market. These investors believe in the technology behind the currency, and the mission they want to achieve. They Hodl and invest in the token with the hope that it will return on investment.
Crypto traders, or at least what most class as a trader, buy/sell Bitcoin and other currencies to make a profit. These traders may not only hold this asset for a month, week, day trade or even scalp trade where they only hold the coin for a few minutes. Also, cryptocurrencies are very extremely volatile and you will have to predict price movement to make a profit.
Now when you only hold cryptocurrency even for a short time intending to make a profit you will need to sell high and buy low. This is hard to get right even crypto experts get this wrong, however, you can use a style of trading with a platform like ByBit where you can long crypto and short cryptocurrencies. Doing this allows you to make a profit when Bitcoin goes up or when Bitcoin goes down. (using Bitcoin only as an example you can trade multiple currencies)
Cryptocurrency tech is still new. You have to remember is only 10 years old but has only really started to get advanced in the last couple of years. We still do not know what the future holds for Blockchain. We know that it’s here to stay but what will crypto look like in 5, 10 or even 25 years from now? One thing is for certain, governments and regulators will get involved more and more. How will that affect markets and these companies that are trying to make an equal and decentralized world? We will have to wait and find out.
Here are several factors that can affect cryptocurrency prices:
- Regulation and governments announcement or restrictions e.g. the SEC.
- Security flaws in technology, resulting in attacks on cryptocurrency exchanges and crypto-wallets.
- Countries announcing that they are banning cryptocurrencies and their technology.
- Hard forks, halvings, coin burning.
- Bitcoin Whales enter or exit the market.
- Or simply the Market Makers are controlling the price to fill their orders.
Cryptocurrency trading could be a great fit for you but only if you have a good understanding of the market and trading skills, accompanied by a solid trading strategy and risk management techniques. One way to manage risk and trade, if you are not a confident trader, is to use automated crypto bots.
What is Forex Trading
Let’s talk about the forex market. FOREX stands for The foreign exchange market (FX or forex) and is by far the largest financial market in the world with over 6 trillion US dollars traded daily. Currency traders are drawn to the market as it is one of the most liquid trading vehicles in the world and includes a wide range of currency pairs available to trade with low transaction fees.
The foreign exchange market allows individuals, as well as governments, institutions and retail traders, to exchange one currency for another. This process takes place over the counter (OTC) through the interbank market, instead of on a centralized exchange.
There are a lot of factors that can move the Forex market. These include country-specific factors, such as GDP, unemployment rate, inflation rate, an election of a new president and there’s a lot more. This is why Fx traders use an economic calendar to stay up to date with important economic events that might affect the market so that they can anticipate a potential entry into the market.
Many people wonder how to make money trading forex. It’s easy. But when a currency is low and sells when a currency is high with a profit or vice versa depending on your trade as in forex you can also Long and Short like in crypto trading. Though fx it’s a straightforward process it requires an intense understanding, plenty of preparation and experience. Don’t even think that becoming a currency trader you are going to be making money right away if you don’t know trading fundamentals. You will lose all your money and be either stopped out or liquidated.
What Are The Similarities Between Crypto vs. Forex trading?
Now that we know about these markets, let’s talk about the similarities between forex trading and crypto trading.
Whether you choose to trade forex or crypto, you must know that each type carries its risks, Generally speaking, forex trading is seen as the ‘safe’ option as it is more regulated and stable, whereas crypto trading can bring you larger returns but with potential great risk if you are not careful. Of course, some people have in the past randomly picked a coin and 10x, 100x, or even 1000x their starting investment.
The two markets are very similar in the sense that they are electronic online trading forms of currency; it is only really what the technology is built on that separates the two as crypto trading using blockchain technology. All you need is either a currency market or access to the Internet, computing or mobile device to start trading. Mobile is more difficult to trade on as you may wish to do more in-depth analysis and market research before making a trade.
The liquidity of the forex market and the volatility of the crypto market means that traders would have to use different trading strategies for the two markets depending on the pair they wish to trade.
Many forex traders have turned to the cryptocurrency markets due to their recent growth in popularity and profitable upsides. At the end of the day, the decision of whether to trade forex or cryptocurrency depends on your goals, knowledge and risk tolerance. FOREX like USD/YEN may move a few pips or 0.5% in a week whereas crypto like Bitcoin could move 20-30% in a matter of days.
Well that’s about it, so now you know the similarities and differences Between Crypto and Forex Trading and we hope you have a better insight to help you decide on which type of trading you would like to get into. Remember to become a successful trader this is not something you can do for one week or a month, it takes years to learn this.
Good luck to you all and make sure you seek professional financial advice.
If you are feeling inspired to try trading you can sign up to ByBit.com where you can use leverage trading of up to 100x leverage.
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