Crypto trading is often mentioned in the same sentence as forex trading. This happens because crypto does involve the trading of currencies.
Nevertheless, there are some differences between the two types of markets.
Forex trading is an established product with a long history, while crypto trading is relatively new. The foreign exchange market has a daily volume of around 6.6 trillion US-Dollars. While the cryptocurrency market has an average daily volume of 0.1-0.2 trillion US-Dollars. Hence, the forex market has a way higher liquidity.
Moreover, when we look at the market capitalization as a whole, we can see that the value of all forex currencies (comprised of 170 different FIAT currencies) sits at around 2 to 3 quadrillion US-Dollars. However, the market capitalization of all cryptocurrencies sits at 1 to 2 trillion US-Dollars. So, the value of all forex currencies is 2.000 to 3.000 times bigger than all cryptocurrencies.
Forex is a traditional market that often involves intermediaries, brokers, and other institutions that charge fees at every step of the trading process. On the contrary, the deliberate removal of a middleman is one of the biggest attractions of crypto trading.
Stability, Regulation, and Volatility in Crypto Trading and Forex Trading
Forex lacks the same volatility as crypto, making it complicated to make significant gains without leverage. However, this comes with the advantage of available liquidity. In other words, it’s easy to exchange one particular FIAT currency for another, like US dollars for British Pounds. Such orders are usually executed in microseconds.
The forex liquidity also ensures that even large trades do not affect the market price. In crypto trading, large trades often impact the price, especially if you move away from the two biggest cryptocurrencies, Bitcoin and Ether. Since there are much fewer trades (lower volume) for cryptocurrencies, single transactions will easily move the whole scene. This also means that the average volatility is way higher in crypto trading than in forex trading. Hence, it makes it easier to make a profit with a small bankroll and riskier.
What Should You Choose?
Whether trading forex or crypto is a better option is a personal choice. Both markets have their advantages and disadvantages. For example, while crypto trading can bring more potential returns and incurs fewer fees, forex trading offers more stability and less volatility. Experienced traders advise inexperienced investors to diversify their investments to minimize risks and increase profits. So, you may not have to choose between trading crypto or forex. You can try both of them and decide which one suits your needs and trading style the best.
Read More News: How to protect your assets when trading Margin
