DIFFERENCE BETWEEN THE CRYPTO MARKET AND THE FOREX MARKET?

Forex Trading and Crypto trading are emerging as new profitable ways of online trading. How different are they from each other?

CRYPTOCURRENCY

Cryptocurrency is decentralized digital money that’s based on blockchain technology. You may be familiar with the most popular versions, Bitcoin and Ethereum, but there are more than 5,000 different cryptocurrencies in circulation.The crypto market is a place to trade and exchange cryptocurrencies

FOREX

Forex (FX) refers to the global electronic marketplace for trading international currencies and currency derivatives. It has no central physical location, yet the forex market is the largest, most liquid market in the world by trading volume, with trillions of dollars changing hands every day. Most of the trading is done through banks, brokers, and financial institutions.

DIFFERENCE BETWEEN THE CRYPTO MARKET AND THE FOREX MARKET?

The Number of Assets

The difference between the number of available coins/assets is significant between the forex and the crypto markets. The forex market offers limited tradable currencies, such as the United States Dollar, Euro, Japanese Yen, Pound Sterling (GBP), Chinese Yuan, and others.However, there are more than fourteen thousand cryptocurrencies currently available, according to CoinMarketCap. These currencies involve USDT, LTC, DOT, ETH, BCH, LINK, XMR, and many others. But it is notable that Bitcoin is the top cryptocurrency when it comes to market dominance, popularity, userbase, and market capitalization. Similarly, besides Bitcoin, Ethereum, Binance Coin, Solana, and Cardano are the most actively traded cryptocurrencies in the market

Liquidity

When it comes to converting your investments into cash, the forex market has a relative advantage. For example, forex trading volume exceeded $6.7 trillion back in 2019. It makes it evident that it is comparatively easy for users to trade assets. Increased liquidity decreases the bid-ask spread, making it convenient for traders to trade assets at reasonable prices.However, the case in cryptocurrency trading is a bit different. Certain assets in this market offer high liquidity, hence low bid-ask spread and reasonable prices to trade coins. However, if you go for coins with less trading volume, chances are that you will not be able to trade those coins at the desired price.

Volatility

The crypto market is highly volatile in comparison to the forex market. This factor is a window of opportunity for those looking to make huge profits within a small time period. Especially, currencies with low trading volume fluctuate rapidly while the ones with higher market capitalization and trading volume maintain stability in the short term. Low fluctuation in the forex market has its own pros and cons. Where it limits the opportunity to make large profits, it controls risks associated with investments.

Profit Potential

As discussed above, the high level of fluctuation in the crypto market increases the potential to make huge profits. However, other factors, like the amount of investment, also play a role in the profit potential. If you make a huge investment, you will enjoy greater rewards. However, you must invest diversify your investment wisely and stay updated to trade cryptocurrencies.

Although the forex market also offers a large profit potential, it is more relative to the amount of investment.

Market Size

As of November 2021, the crypto market cap stands at $2.8 trillion with a 24-hour trading volume of $124 billion. Even though cryptocurrency prices have exploded during the past few years, the trading volume of the forex market is still very high. It can be determined by the fact that in 2019, more than seven trillion dollars were being traded on a daily basis.

Venues for Trading

As compared to crypto trading, forex trading is mainly done through brokers who are usually banks. These banks trade with each other, a process known as the “interbank market.” These brokers are usually called institutional investors who accumulate and trade the investments of their clients. However, the market offers opportunities to retail investors as well.

On the other hand, crypto trading is done through two main venues: decentralized and centralized exchanges that require electronic devices with the internet to connect. Some traders use centralized exchanges to take advantage of a secure environment with high liquidity. Other traders utilize decentralized platforms to keep themselves anonymous and trade tokens without involving any third party.

WHICH SHOULD YOU CHOOSE ?

	Forex	Crypto
Cost of Trading	Lower	Higher
Market Hours	Weekdays	Weekdays and Weekends
Accessibility	All brokers offer at least the major Forex pairs	Many, perhaps most brokers now offer major cryptos
Leverage / Volatility	Low volatility, high leverage	High volatility, low leverage
Exponential Trends	Less common	More common
Major Price Drivers	Macroeconomic factors, large option barriers	Microeconomic factors, popularity of particular crypto