At the moment, the total capitalization of the cryptocurrency market is approximately about $900 billion. At the same time, the value of the Forex market, back in 2019, was about $2.4 quadrillion or $2409 trillion.
Comparing these numbers prompted us to write this article, in which we will reveal a popular topic of debate between these two huge areas of the financial industry.
There was a time, and we hope it will return soon, when the cryptocurrency market experienced an impressive rise. There was a talk that crypto coins and tokens would once replace fiat (traditional) currencies. Many pointed to the decentralization of the cryptocurrency market as its advantage. In view of this fact, crypto trading is increasingly mentioned in the context of quick and multiple benefits.
So which is better for you, crypto or forex trading ❓
There are both similarities and differences in trading crypto assets and standard currencies.
▪️ When people trade in the Forex markets, they trade one currency in exchange for another, relying on the assumption that the second currency will increase in value compared to the first. When it happens, the traders recover a portion of their original investment and get rewarded with a profit. Despite the fact that trading crypto assets most often involves simple speculation, trading crypto assets also contains currency pairs in relation to real currencies (BTC/USDT, ETH/USDT).
Both types of trading are similar in the fact that pricing in these industries is equally influenced by the laws of supply and demand. But, the variables that control supply and demand in the crypto market are significantly different from those that affect the currency market.
▫️ Let’s view the factors affecting the crypto market. Other than retail traders and miners, the first centralized Bitcoin exchanges were quite small, but as they grew, these small “marketplaces” have grown into giants that provide access to thousands of different digital currencies.
It should also be noted that even at the beginning of the cryptocurrencies development, the possibility of storing cryptocurrencies on behalf of the other party was not implemented. MicroStrategy (MSTR) opened the door for those organizations that were interested in using cryptocurrencies in their treasury strategies. It should be reminded that the company first acquired BTC in August 2020.
▪️ The main difference between the two types of trading is the difference in risks. Cryptocurrency trading is traditionally more risky than fiat currency trading. Both types of trading offer the use of leverage, however, it is worth remembering that the crypto market is often subject to high volatility, and therefore the use of leverage can have a much more negative effect on the result of the transaction than in a similar case in the forex market.
At the same time, due to price fluctuations in the foreign exchange market, traders can provide more liquidity (transactions become more secure). The daily volume of foreign exchange transactions in the forex market is more than $6.5 trillion.
▫️ Thus, there is no single answer which is better. For beginners, learning these types of trading will be equally difficult.
A cryptocurrency trader may face the challenges of high market volatility, while a forex trader may be exposed to the negative effects of high leverage, as forex trading involves more leverage than generally in crypto trading.
Would you like to see a similar comparison of the Stock and Crypto Market ❓