WHAT IS THE BEST?
FOREX or CRYPTO TRADING?
Comparing the difficulty level of different financial markets is essential before entering any of them. For some, stocks have always been the way to go, others prefer fiat currencies, and modern-day traders look more and more towards digital currencies. The key to determine which market is “easier” for you lies within your trading personality and preferences.
I remember how controversial Forex sounded back in the 70s. 50 years later, it’s a massive part of the financial universe. In a similar way, cryptocurrency trading stroke me as a huge risk when I first found out about it.
Differences Crypto and Forex:
Although both currencies and cryptocurrencies share some similarities, their designated exchanges are a lot different than one might imagine. let me share just a few differences:
1.Supply
The Forex market compiles global financial markets, so the supply here is unlimited. The FX can’t simply “run out” of USD, GBP, or any other traditional currency.
Cryptocurrencies, on the other hand, come with a limited supply. Every crypto has a cap of how many coins can be created and used in circulation. Such an approach makes demand more valuable for a digital asset compared to its fiat counterparts.
2. Volatility
Volatility relates to asset safety – higher volatility means a riskier asset. It is also connected with more noticeable swings in both chart directions. With traditional currency, volatility varies between 0.5% and 1.0%. A 60- day estimate of Bitcoin Volatility shows rates of 2.81%, almost three times over the highest FX currency volatility.
For many aspiring traders, such volatility is the gateway to massive profits, sometimes in a single ultimate trade. Nonetheless, volatility is a double-edged sword. An imbalanced crypto prediction can sink your account if the tides go the other way.
3. Liquidity
Liquidity describes the ease to enter or exit a designated asset or currency without affecting its overall price. For example, bonds, stocks, and currencies are liquid while real estate and art are considered illiquid. In fact, most privately traded assets are non-liquid. In the crypto camp, things stand a bit differently.
At the moment, there are over 200 cryptocurrency exchanges, 21 centralized while the others are P2P-based. The increasing number of exchanges serves for better liquidity but even now, digital coins experience moments of illiquidity. Their capped nature deems them to never reach the liquidity level of Forex.
4. Availability
Forex truly has the most participants in a market, but often enough traders are restricted to take the optimal part in it. Be it government laws, geographical factors or central bank restrictions, not everyone on the planet can participate in the FX freely.
Quite the opposite with cryptos, anyone can access a cryptocurrency exchange and join the party. Even if you are located at the ends of the world without a bank in sight, you can still join a crypto trading platform. Given you have an internet connection, of course.
Profit Potential between Cryptocurrencies and Forex
I will be short and leave the numbers speak for themselves. If someone invested $100 in Bitcoin back in 2009, their BTC would be worth $9.2 million at the beginning of December 2019. That’s a 9,150,088% return-of-investment rate over 10 years.
I’ll let that sink in for a moment.
Yes, following cryptocurrency trading algorithms is riskier and more complex, but let’s discuss one particular strategy that can land you enormous gains if executed properly, which is HODL. To HODL a cryptocurrency means to invest in it and hold your investment until you can cash out substantial value. No matter the swings in between, traders hold on to their desired cryptocurrency until they’re ready to gather the spoils.