Cryptocurrency vs Forex Trading – Which Is Right for You?
Cryptocurrency vs Forex trading? Have you ever had a dilemma about what is the better investment at the end of the day? Are there really any real differences between these two? There’s a world of that, believe us.
Whether you are a beginner in Foreign exchange, or crypto trading and investing in Bitcoin and Ethereum on crypto markets, or you already have some relevant experience, the eternal dilemma is certainly “Forex vs Cryptocurrencies”?
But before we get to all the answers to these questions, let’s answer the main ones: What is cryptocurrency? Is investing in cryptocurrency better than trading Forex? What’s the meaning of life? Except for the last one, we’ll help you find answers. Read on!
What is a Cryptocurrency?
At first, it’s easy to dismiss cryptocurrency as another tech wet dream for those who want to avoid banks. But it’s more than that when it comes to digital currency. If you’re about to trade currencies or thinking about Forex vs crypto, it is essential to know what they are exactly.
A cryptocurrency has many features you cannot find in other digital assets.
For instance, no central authority controls cryptocurrencies. The underpinning technology makes for a flawless way of decentralization. As you can imagine, this nature opens the door and offers a whole lot of advantages.
A bunch of unique codes
A cryptocurrency is, practically, a bunch of unique codes. It’s math at work, and it’s very lucrative. Thanks to Satoshi Nakamoto, the elusive and unknown inventor of bitcoin, we got our hands on the first cryptocurrency.
Although it wasn’t Nakamoto’s real goal, his invention paved the way for building a digital cash system. That was circa 2009.
Fast forward to 2019, and we now have things like a crypto exchange. You may even be a bitcoin trader who wants to learn more about the asset. Who knows, right? Are you already investing in cryptocurrency?
With the rise of bitcoin, which is a highly volatile and currently the most profitable cryptocurrency, comes the rise of other altcoins. Did we say it was just a wet dream? Come on, pilgrim. This is real life.
What’s the Blockchain?
Any discussion of bitcoin and cryptocurrencies isn’t complete without touching on the subject of blockchain. When you’re buying or selling bitcoins, your transactions are set in stone. Or, perhaps, set in digital, publicly viewable blocks. The blockchain is a public ledger where all transactions go.
It records all things happening on the network while also keeping the users mostly anonymous as they’re investing in cryptocurrency. This underpinning technology doesn’t only make digital coins enthusiasts go head over heels for investing in cryptocurrencies. It also offers a glimpse of what’s in store for the future of finances.
Just imagine its use cases: government processes, transportation, contracts and agreements, and many others. No, baby, this isn’t a sci-fi dream.
Cryptocurrency trading vs Forex
With what we’ve said so far, you probably know why cryptocurrencies vastly differ from Forex. One of their similarities, though, is that you’re dealing with a decentralized market. This means you needn’t follow the rules and regulations of a central authority figure. There’s no Big Brother in this house, y’all.
Another similarity, perhaps, is that you’re dealing with currencies in both markets. On the one hand, you deal with fiat currency pairs. On the other hand, you’re dealing with currencies, too, just digital. But that’s an oversimplification.
Fiat currencies have the backing of central banks. The world recognizes them as legal tenders.
Meanwhile, bitcoin and other cryptocurrencies are still trying to convince the world that they’re a thing. They’re the future of finance, they say, but they need to clear some hurdles first.
These hurdles include regulatory oversight, potential security flaws, a not-so-stable price movement, and a history of illegal usage.
Investing in Cryptocurrency
Still, the promise of cryptocurrencies still prevails. Just look at bitcoin price over the years, bitcoin price last month, and bitcoin price today. You would see rapid fluctuations in prices. But you would also see undeniable proof that people are rooting for it.
If that’s not enough to convince you, look at the cryptocurrency market capitalization.
As of writing, bitcoin has a market cap of $184,060,768,876. Its price is around $10,259.00. If you’re a bitcoin trader, you must be very proud right now.
Ethereum, the second frontrunner in the crypto sphere, has a market cap of $21.467,245,426. XRP has $11,466,560,846. Bitcoin Cash has $5,589,623,033.
If you combine all of their market caps, you’ll get a bunch of numbers we’re sure won’t fit your wallet.
The Game of Value
Of course, you can’t start being a bitcoin trader if we just said you had to. How does a cryptocurrency, bitcoin, for instance, have value in the long term? We got two words to answer that question: scarcity and utility.
There is a limited and scarce supply of bitcoin. Overall, there are only 21 million bitcoins. People need to “mine” these digital coins.
As time passes, and even while more are investing in cryptocurrency, mining bitcoins becomes tougher. The fewer available numbers of bitcoin, the higher its value. That’s simple spelling.
In that sense, cryptocurrencies are just like gold. The precious metal needs mining, there’s less and less gold left, and it’s getting difficult to mine.
The Question of Utility
But we can’t just jump on the bandwagon and be a bitcoin trader just because the supply is fewer. There’s obviously a limited supply of common sense in the world, but very few are investing in it, right?
Their potential for utility keeps cryptocurrencies popular and a crypto exchange running.
This is where the forex market enters the picture again. As you assumed, it’s the largest financial market in the world, with a daily turnover of circa 6.6 trillion. It’s simple: fiat currencies rule the world. People use them every day with their transactions.
Forex trading assures you that you are trading something with real value. Fast forward to three or five years, and you know that the dollar is still a thing. Investing in cryptocurrency, on the other hand, needs you to trust that the hype for bitcoin will endure.
You will have to keep hoping cryptocurrencies turn mainstream. Until that happens, the forex market will remain the more popular of the two.
What is essential to keep in mind?
Forex and bitcoin trading differ in several aspects. Both rely on global supply and demand factors to determine the prices of paper and digital currencies—Bitcoin’s price rises when demand increases and decreases when demand falls, similar to Forex.
However, the supply uncertainty created by international central banks does not affect bitcoin. The rate at which bitcoins are mined is predictable, while changes in monetary policy can cause significant fluctuations in currency prices in Forex.
Additionally, Forex is influenced by a specific country’s economic decisions and conditions, while the value of bitcoin is linked to the cryptocurrency ecosystem’s fundamentals.
Trading bitcoin is comparable to trading other assets on an exchange. Like Forex, you can trade dollars for bitcoins on exchanges. However, bitcoin is not a tangible currency like paper money, and some people consider it less dynamic than trading currencies.
To sum up the difference between investing in cryptocurrency and Forex, we can say that cryptocurrencies are still a work in progress. Cryptocurrencies, particularly bitcoin, show higher levels of volatility.
Bitcoin trading fees are much lower than forex trading fees.
The forex market’s sheer size ensures that it’s solidly liquid. It offers diversity, too, although some pairs don’t showcase profitable levels of volatility.
Perhaps the best thing about investing in cryptocurrency is the lack of institutional involvement. Banks, central banks, and regulators can all have a break. While comparing Cryptocurrency vs Forex trading, it is essential to note that they share similarities and differences. Although both rely on global supply and demand, bitcoin’s predictable mining rate sets it apart from Forex’s supply uncertainty.
Despite this, bitcoin’s value remains subject to the cryptocurrency ecosystem’s fundamentals. Trading bitcoin is similar to other assets, but its intangibility sets it apart from traditional currencies.
Overall, you’ll be the judge of which is better for your trading career. What we suspect, however, is that you’ve already made up your mind. You’re planning to be a bitcoin trader. Many traders have found their fortune in the cryptocurrency market. The key is to understand what you are getting into.