Forex vs. Crypto Trading: What is Best for you? - Coin Amazon

Forex vs. Crypto Trading: What is Best for you? - Coin Amazon

written by John Murphy | January 27, 2023

Many investors confuse cryptocurrency forex, while some consider it an extension of traditional money exchange. However, crypto trading differs in many ways from forex trading. Thus, we will guide those curious minds that are reeling for the answers to the question – Forex vs. Crypto Trading: What is Best for them?

Since the basics of crypto trading are somewhat derived from traditional forex trading, cryptocurrencies established themselves as a digital gold rush of innovation. In addition, a market work of $3 billion is not an extension of another trading platform and deserves a separate identity.

Therefore, besides working on similar rules, forex and cryptocurrencies greatly differ and have daylight running between them.

Many experts suggest that cryptocurrency is the future of finance; therefore, a market equipped with Bitcoin and Ethereum should not merge itself with forex.

Through this guide, we will answer – Forex vs. Crypto Trading by highlighting key differences and similarities. So, stick around till the end.

Forex Trading

Forex, or foreign exchange markets, deals in the trade of foreign currencies. In contrast, investors make money from the difference in buying and selling exchange rates.

In a more complex nature, forex traders predict the movement of global economies and make investments accordingly. Since the value of global currencies moves according to the native country’s economy.

Crypto Trading

Crypto trading is buying and selling of cryptocurrencies, tokens and NFTs. It is a relatively new concept and is evolving its trading trends and regulations.

Since the crypto market is decentralized, thus investors have the liberty of choosing any digital coin from any place in the world. At the same time, the fastest cryptocurrencies keep on emerging in the market.

Mechanics of Forex and Crypto Trading

The basic driving force of both crypto and forex trading is demand and supply. However, the forces behind demand and supply are significantly different for both markets.

For instance, cryptocurrencies run on blockchain technology through a decentralized ledger. In addition, there is no binding on project owners, as we see each day new coins keep on emerging.

On the other hand, forex trade is highly regularized, and prices are stable. While the addition of any new currency is a difficult task as it requires backing a full economy.

Differences Between Forex and Cryptocurrency Trading

As we said previously, cryptocurrency is not forex, and this argument is supported by several reasons listed below.

  • History

The cryptocurrency market is relatively new, while forex has been in practice for decades. Thus, forex has a history dating back to when the world adopted multiple currency concepts. However, cryptocurrency was introduced only a decade ago.

  • Risk Levels

The risk levels for both markets largely differentiate them. Crypto trading is highly volatile as price fluctuations change swiftly, while price changes in forex trading are relatively slow. Therefore, the crypto market is highly risky as compared to the forex market.

  • Regularization 

Another key difference is regularization. Forex trading has a set of rules and regulations which each currency is bound to follow. Contrarily, the crypto market is not as regulated. While the crypto market boasts of not being bound by trading rules, it also becomes one of its biggest cons.

  • Number of Instruments

Currently, there are more than 20,000 cryptocurrencies in the market. However, forex trading has limited options. Since most forex traders only deal in major currencies like US dollars, euros, Pound Sterling etc.

  • Liquidity

Forex trading is a highly liquid market. Its single quarter’s trading surpasses cryptocurrency’s entire years of trade. The crypto market cap has recently crossed the $3 trillion mark.

  • Volatility

The cryptocurrency market is highly volatile, while forex is stable. Even the leading cryptos like Bitcoin or Ethereum rise and fall in value hap hazardously. Thus, leaving investors only to make a wild guess. However, forex trading is relatively smooth sailing.

  • Profit Potential

Crypto trade came into light on the promise of offering outsized profits. In trading, profits are directly proportional to risk. Therefore crypto market offers better profits as compared to forex trading.

  • Business Hours

The crypto market is open 24/7, unlike the forex market, which usually operates during normal business hours. Forex traders can switch off their screens and enjoy weekends while the crypto market peaks on weekends.

  • Security

Since the crypto market operates in a digital world, thus it is prone to hacking, scamming and other cyber security risks. On the contrary, forex trading is more of a tangible thing. In addition, forex trading is highly regulated, so forex trading faces fewer risks.

It is quite evident from the above differences that forex is not cryptocurrency. Since both trading options have contradicting features.

However, choosing between forex vs. crypto trading is solely the investor’s discretion. The decision widely depends on financial goals, trading style, lifestyle and available capital. However, if you choose crypto trading, we suggest seeking professional advice.

Frequently Asked Questions

Is forex safer than crypto?

From a regulatory perspective, we can safely say that forex is safer than crypto trading. Additionally, the crypto market is less liquid and bears lower trading volumes.

Is crypto or forex trading better for beginners?

For both sets of markets, newbies need to get familiar with lingos specific to that market. In addition, they must identify risks, return potential, and other financial decisions for each platform before selecting. Generally, the crypto market has easier entry points for beginners. 

What is better – forex vs. crypto trading?

Both markets have their pros and cons. Crypto or forex decision depends on the investor’s choice of trading. A high-risk taking investor will choose crypto, while an investor contended with low risk and low returns will opt for forex trading.

Is Bitcoin considered forex?

No, Bitcoin is not forex. It is a digital currency floating in value and available for trading on numerous crypto exchanges.

Parting Thoughts

We have established that forex vs. crypto trading and differs in operation, structure, regulation, security and mechanism. 

It established key differences between forex trading and crypto trading. Despite both trading seeking value from the demand and supply function, they have major differences which set them apart.

Additionally, choosing crypto or forex is the sole discretion of the investor. Since each market has its positives and negatives, it is important to study both markets and equip yourself with the required knowledge to tackle risks before jumping into anyone.

Please leave your views in the comment section and let us know your preferred way of trading.