If you’re new to trading and considering what financial market to try, the forex market is usually the most prominent. However, its dominance has recently been challenged by cryptocurrencies. With Bitcoin rising from nothing to its all-time high of $20,000, the cryptocurrency market was welcomed by traders as a new avenue for making money on the internet. Even though the price of Bitcoin and other cryptocurrencies has declined since this peak, traders still see opportunities because of the volatility of cryptocurrencies.
Both forex and cryptocurrency trading are considered good options for making money online today, but they also have their own advantages and disadvantages. Let’s find out how different they are.
Forex Trading vs Crypto Trading: Similarities
- Currencies and crypto can be traded via contracts for difference (CFDs), which are tradable contracts between clients and brokers, who will exchange the difference in the current and final value (at the contract’s end) of an asset.
- Everyone can participate in forex and crypto trading if they have a computer or mobile device and an internet connection.
Forex Trading vs Crypto Trading: Differences
- Trading time: the forex market is available 24/5, while the crypto market is open 24/7.
- Liquidity: forex is currently the world’s most liquid market with the daily turnover of more than $4 billion. The crypto market is far away from this figure.
- Volatility: the higher the liquidity is, the lower the volatility and the risk are. Therefore, forex trading is less risky than crypto trading.
- Gaps and slippages: crypto traders frequently encounter gaps and slippages due to the high volatility of the crypto market, whereas forex traders rarely face them (except for those who trade exotic currency pairs at low-quality brokers).
- Costs: forex or cryptocurrency trading via CFDs costs much lower than purchasing cryptocurrencies directly at an exchange.
- Brokers: most forex brokers are licensed, while crypto exchanges are not. Besides, forex brokers often provide traders with better trading conditions.
- Trading platforms: forex traders usually trade on MetaTrader 4, MetaTrader 5, or web-based platforms provided by brokers. Cryptocurrency traders can use these platforms to trade some crypto pairs (via CFDs) such as BTC/USD, ETH/USD or XRP/USD. However, they can also buy or sell cryptocurrencies via exchanges.
- Drivers: the fundamentals that influence currencies’ movements are usually separate from those that affect the crypto market. The exchange rate of currency pairs is often driven by economic development, political uncertainty, fiscal policy, central banks’ interest rate decisions, or even weather factors. On the other hand, cryptocurrency prices are often influenced by the development of the underlying crypto project and new rules applied to the crypto market (regulation, sanctions, etc.).
- Asset storage: crypto traders who trade via exchanges will have to find a place to store their coins (in crypto wallets or directly on an exchange). However, they don’t have to do this when trading forex or cryptocurrencies via CFDs.
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The Bottom Line – Is Forex or Crypto Trading Better?
Based on the above comparison, the forex market appears to have more advantages than the crypto one. Nonetheless, if you take a closer look, both forex and cryptocurrency trading have different benefits, and it’s difficult to judge which one is superior over the other.
The good news is, you can benefit from the price movement of traditional currencies and cryptocurrencies via CFDs at easyMarkets and other reputable forex brokers. This way, you don’t need to give your financial details to an unregulated crypto exchange, go through complicated verification procedures, and pay high fees just to get some crypto coins.
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So, whether you prefer forex or crypto, start your trading career with a regulated forex broker. You will have more trading options, and more peace of mind.
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