Which is Better Forex VS Cryptocurrency Trading?
- August 23, 2021
- Posted by: Daniel Richard
- Category: Forex Trading
Cryptocurrency has been used in the market since 2010. Generally, the forex or other brokers offer to the traders to trade in the liquid cryptocurrencies, which are Tether, Ethereum, Ripple, and Bitcoin.
Trading in cryptocurrencies is very easy for traders. So, after opening a trading account, you can choose the forex currency pair or this cryptocurrency, or you can use them both.
Brokers provide the guidelines for trading in forex or cryptocurrencies. You have to choose the best aspects, which will be more profitable for your trading. In this article, you will get an idea about the advantages and disadvantages of forex trading and cryptocurrencies, and also the main difference between them.
What is Forex?
Forex is the short form of foreign exchange, and there is another name that is FX. It is the biggest currency market across the world, and its everyday transaction is approximately $6.6 trillion. This currency market is open twenty-four hours a day and five days a week. It is the most liquid market. That’s why the currency rate is changing every moment. The forex trader exchanges one currency to another for profit.
While trading, the forex traders buy one currency and sell another. The exchange rates of the two currencies are different from one another. When two currency rates are quoted against one another, it is called the currency pair or currency cross. A currency couple, which involves the U.S. Dollar, is the currency pair. On the other hand, when the U.S. Dollar is not engaged in a currency couple, that is the currency cross. The currencies of the U.S.A, Great Britain, Europe, and the Japan are the most crucial and popular currencies in the forex market.
Generally, the currency pairs offer the trader for trading; you never get access to buy the ownership of any currencies. Traders only agree to make a profit or loss by exchanging the currencies. In a currency pair, you will find two currencies, and the value of these two is different.
Pros and Cons of Forex
The forex market is one of the most widespread markets in the world. It is highly susceptible in the global market and makes the exchange value very sensitive to change in bank policy, and the release of different economic data.
The central bank controls the forex market that means controls the value of the currency pair. So, this bank increases and decreases the supply of currency as they need. The ability to stop and open the supply and demand is also under the control of the central bank. The bank attempts to stabilize the exchange rates.
The main advantage of forex trading is its low cost. You can start your business with a low investment. Suppose, In a currency pair like EUR/ USD, the forex traders pay the spread or commission one pip for a round trip. This commission represents 0.8% of the total assets. This is a meager cost to pay for the forex trader. On the contrary, the cost of trading in cryptocurrency is comparatively higher than forex trading.
The price movements of the forex market are not very active, for this reason; most of the time, the price becomes calm. The retail forex brokers offer the traders high leverage for the forex currency pairs. Therefore, your buy and sell amount will be more than your deposited amount; this is not good for your future trading because you can lose all of your capital for accepting high leverage.
Though there is no forex trading Center, this is the most widespread currency market in the world. The opening time of the forex market is from Monday morning to Friday night. Traders can trade twenty-four hours a day and five days a week. But, some brokers can offer you to trade over the weekend.
The European, American, and Asian are the main forex market sessions. London, New York, and Tokyo dominate the sessions because these cities are the most important for the financial market. So, the forex market is the most active in New York and London sessions from 9 am to midday.
What is Cryptocurrency?
Cryptocurrency is a popular currency system because it is one kind of digital currency. Private individuals, groups, and some companies make this currency. People like this kind of currency because it is safer than regular money. The government does not control cryptocurrency. That’s why it is free from bank charges and government control.
There is no actual shape in this kind of currency. Though cryptocurrencies are not legal for exchanging goods and services like the national currency, many companies accept cryptocurrencies. When you buy and sell cryptocurrency in the original market, the transactions go through the decentralized system, which goes a long way.
Blockchain technology formalizes cryptocurrencies transactions for ensuring that they will never be debased.
Approximately the daily trading volume of cryptocurrencies is $4.1 billion, that is two-thirds of the forex market. The most popular and the first cryptocurrency is Bitcoin, which was first introduced in 2009. The market capitalization of Bitcoin was approximately $204 billion in 2020, where the total capitalization of cryptocurrencies was $350 billion.
You can use two ways for trading in cryptocurrencies. If you want legitimate ownership and buy the original cryptocurrencies, you can use the major cryptocurrency exchange. You have to pay some fees for the security and can make long-term investments.
On the contrary, you may use the most major cryptocurrency for trading with forex or CFD brokers. It is a secure way to trade in cryptocurrencies. So, do not be worried about the security of your digital currency.
When you send the cryptocurrencies from one location to another, it is automatically recorded in an encrypted laser, and this is called the blockchain. You can see this recorded data from any place across the world.
A cryptocurrency user can open several accounts, but no need for any personal data for opening the account. Many companies are starting to use this digital currency because the value of cryptocurrencies is increasing day by day.
Pros and Cons of Cryptocurrencies
You have already noticed that for legal ownership of buying in cryptocurrencies, you have to pay some fees. In lieu of this payment, you will get the security of your digital currencies.
The trading cost of the forex major currency pair is only 0.08%, but the cryptocurrencies cost is more than that. So, the trading of cryptocurrency is comparatively more expensive than trading in forex. Trading in cryptocurrency can be profitable for short-term trading, but it is challenging to execute in cryptocurrency.
The national currency means the forex currency is more comprehensive in capitalization than the cryptocurrencies. Cryptocurrencies are susceptible to micro issues, and they influence their market, which is popularity and integrity. So, in the final result, there will be some successful cryptocurrencies, and these successful cryptocurrencies are widely used. The value of the cryptocurrency is most important for the ups and downs of the market situation.
Cryptocurrencies are more volatile than national currencies, forex currency pairs, or currency crosses. In a year, the forex currency pair fluctuates 10%; on the other hand, the cryptocurrency fluctuates its value 1000% in the same time. The government controls the forex currency, and also the central bank manages the currency, but there is nothing else that will control the cryptocurrencies. By trading in forex, a vast amount can be made, but the level of risk is also high. The cryptocurrency is not as liquid as the forex currency.
For the volatility and high risk in trading forex, brokers suggest trading in cryptocurrency because of its low leverage rates.
You can trade in crypto markets on the weekend of forex. More specifically, on Saturday and Sunday, the crypto markets are open. Though some forex brokers allow trading on weekends, most of the brokers do not allow trading on these days.
Forex vs. Crypto: What is Best for Me?
Someone chooses only Forex or only cryptocurrencies, but someone may choose both. You can choose as you wish.
For making the right decision, you can follow the below table.
|Trading Cost||Lesser than crypto||More than forex|
|Trading time||Five days a week and 24 hours a day.||Every day a week.|
|Availability||Most of the brokers offer the major forex pairs||Recently, many brokers offer the major cryptos|
|Volatility and Leverage||Leverage is high, but volatility is low||Leverage is low, but volatility is high|
|Wideness||More widespread than crypto||Less widespread than Forex|
|Brokers||Forex brokers||Cryptocurrency brokers|
|Regulators||Central Bank||No regulator at all|
For starting trading, it will be more helpful to research and analyze these two markets first. After analyzing the markets, you will easily identify which market is more suitable for your trading. Both markets have advantages and disadvantages. Therefore, due to making a slice of error while trading, you may lose your capital. So be careful about choosing the best market.