Many would argue that comparing cryptocurrency trading with forex is like comparing forex globaux en ligne trading11 and oranges, but that’s not entirely accurate. On closer inspection, there is a number of similarities between the two. Here traders share their thoughts on the mechanics of each.
They both have high volatility which creates an opportunity for quick profits going long or short. The pro of trading crypto and forex is that these are global markets dominated by large financial players who have algorithmic trading capabilities. He explained that the biggest difference between forex and BTC markets is that unlike forex, bitcoin started and scaled via global retail trade and not via institutional players. This makes the BTC markets behave in a very different pattern than traditional forex markets.
21 million coins, with protocols that control new issuance meaning there is little room for manipulation. Higher adoption of bitcoin essentially increases the size of the network, which means more users, higher utility and an increasing price. The lack of outside or centralised influence is unique, and a benefit of the genesis crypto asset. Currency traders looking to profit will, essentially, look to buy currencies that show signs of macroeconomic improvement through the selling of currencies that show the opposite.
BTC is traded on a peer to peer basis, which in its raw form involves little cost. Cox pointed out that this is due to the fact there are no intermediaries in the classic sense, as is the case in the foreign exchange market where brokers and aggregators facilitate transactions between participants, which can often add a layer of fees. These exchanges act as central repositories of assets, facilitating transactions and levying fees on this basis. So yes, this aspect can be seen as somewhat of a similarity however with different mechanics.
The phenomenon of globalization and technology have boosted activity in the trading of foreign currencies, as a result of ballooning cross-border transactions and wide availability of trading means and infrastructure. Most of this volume is attributed to established, developed country currencies, such as the U. There are some similarities here with bitcoin, which can be considered as the dominant reserve cryptocurrency, and which most trading volume can be attributed to. That is where the similarity ends however. Bitcoin’s daily trading volume, which currently ranges in the mid-single digit billions of U. A drop in the ocean, some might say.
Bitcoin’s volatility is also considered to be far higher relative to that of the most dominant currency pairs in terms of volume. Cox explained that trading in emerging market currency pairs, which can show elevated periods of volatility, would be a far better comparison to trading in bitcoin. Trading, particularly that of a short-term nature, is a difficult practice that only a small percentage of players have ever managed to extract profits from, regardless of the asset in question. Of course, we often hear the success stories in the media, however, the many losses that have been incurred by participants seeking to time the market have been swept under the carpet. There are a number of lessons which can be found by analyzing the underlying causes of this crisis and how they led to such problems.
Soros is one of the few exceptions who has had multiple successes trading against central banks over many decades. Also known as the man who broke the Bank of England, Mr Soros stands out as having been involved in several lucrative currency trades that span decades. In conclusion, while there are, in certain areas, extreme differences between the bitcoin and forex markets, there are also similarities and the potential for more convergence as digital assets cement themselves in the global financial system. Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and betting on the unexpected.
What are your thoughts on trading crypto versus forex? Let us know in the comments section below. Need to calculate your bitcoin holdings? Tanzeel Akhtar is a British journalist covering financial markets for over a decade. She writes across all media platforms from traditional print newspapers to online media platforms such as Bitcoin. Tanzeel came across the concept of Bitcoin in 2012 while eavesdropping in on a conversation at a London wine bar called The Arches.
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