If you are juggling between forex and crypto trading, you have landed at the right place. The article illustrates how both tradings differ from one another and the similarities between the two.
Table of Contents
- What is Crypto Trading
- Forex Trading- What’s That?
- Differences between Crypto Trading and Forex Trading
- Are There Any Similarities?
What is Crypto Trading
Cryptocurrency trading is the act of speculating on cryptocurrency price via a buying and selling the underlying coins through an exchange. Cryptocurrencies work under the principle of blockchain technology, which indicates that they are decentralized, and they work without involving any third party/central authority; however, they can be stored in wallets. When a user wants to send cryptocurrency to other participating parties, they send it to their digital wallets. In simple words, cryptocurrencies are providing entirely unique ways to enable money transfer over the internet, and that is the reason, it is a buzzword nowadays.
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Forex Trading- What’s That?
Forex trading is the exchange of currency into another currency for multiple reasons. It is also known as Forex or foreign exchange(FX). It is considered to be a global marketplace for exchanging national currencies with other currencies, and because of its worldwide reach, FX markets tend to be the most liquid asset markets across the world. It is a network that allows buyers and sellers to transfer currency with one another at an agreed value. The best way to understand forex trading is to consider an example of it. If you plan to travel abroad, you have to make a forex transaction (to exchange your native currency into that respective currency).
Differences Between Crypto Trading and Forex Trading
Despite the fact that crypto and forex markets respond differently to global economic pressures, Alex Mashinsky, CEO of Celsius Network, expressed his views regarding the trading systems and mentioned that,
“The pro of trading crypto and ForexForex is that these are global markets dominated by large financial players who have algorithmic trading capabilities. Most individual players cannot compete or match the trading and speed of hedge funds and large banks which swim in these markets.”
But still, they do differ in numerous ways such as:
1. Bitcoin, the first-ever cryptocurrency, started as a scalable global retail trade not governed by any institutional players, which means bitcoin markets differently compared to traditional forex markets.
2. Although the advent of cryptocurrency has taken the world by storm, the cryptocurrency landscape is relatively new when compared to forex trading. Cryptocurrency trading is more volatile as the markets can fluctuate enormously.
3. When people decide to start trading with cryptocurrencies, they believe that price will grow up, and they will gain a profit. Moreover, digital assets are easy to trade with, and its market is accessible 24/7, unlike the forex exchange market.
4. Compared to the cryptocurrency market, forex markets have higher liquidity as a result of a long history of activity.
Kyle Cox, the senior investment analyst at Invictus Capital, explained that “Forex is by far one the largest marketplaces on the planet, with daily trading volume in the trillions of U.S. dollars. Most of this volume is attributed to established, developed country currencies, such as the U.S. dollar, which serves as the reserve currency for the world.”
He also believes that with cryptocurrency, “there is a fair amount of skill, and it must be said, luck involved in this process, as any honest trader would attest to.
Are There Any Similarities?
- Both markets are driven by supply and demand, and both the trading schemes can be highly volatile, indicating significant price changes.
- Crypto and forex markets include players varying from people to massive financial institutions, all either handling regular business or attempting to earn a profit.
- Most importantly, both require an in-depth understanding of the current market, and risk management is mandatory to earn profits in each trading.
- They both deal in currencies and rely on modern-day communicational technology to perform trading. Forex was introduced prior to IT advancements, whereas the concept of cryptocurrency was introduced later that relies completely on the internet for trading purposes. This is the reason it is also referred to as ‘digital currencies.’
We hope that you have a clear understanding of both the types of trading schemes from the above discussion. So which type of trading do you think is better? Let us know in the comment section below.
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