Why crypto is better than forex?

Cryptocurrencies 和 foreign exchange (forex) are two common trading options in the financial sector. Purchasing or selling cryptos like Bitcoin, Ethereum，並且 Litecoin on a decentralized digital exchange is known as cryptocurrency trading.

On the contrary, currency trading involves buying and selling various currencies in the forex market. Both trading methods have a high risk/high reward ratio. Knowing the differences between the two is crucial for choosing the one that best suits your investing objectives and risk tolerance.

Although trading forex is common in the financial markets, over time, cryptocurrency trading has also gained popularity. Discover the differences between trading cryptocurrencies and currency pairs and why crypto might be better than forex.

About crypto trading

Crypto is short for cryptocurrency and refers to the exchange of cryptos on an independent digital exchange. In other words, it is a non-physical currency known as cryptocurrency trading. In order to increase transparency, blockchains are used by the majority of cryptocurrencies to store transactions. Cutting out the mediator which frequently leads to extra transaction costs, helps to reduce risk.

Cryptocurrencies use cryptography to secure and validate transactions. Digital currencies are virtual or digital tokens, that in contrast to traditional money, lack an authoritative body or financial institution to support them, and the market’s supply and demand is the only factor affecting their value.

What is forex trading?

Foreign exchange, or forex, is a financial market that gives you access to different currency pairs from across the world. In simple terms, it refers to the market where currencies are exchanged.

The buying and selling of various currencies on the FX market is known as forex trading. The world’s largest financial market is the foreign exchange market. It trades for more than $7.5 trillion on a daily basis.

While forex trading occurs, you would exchange one currency for another at a predetermined price. You have experienced forex if you have ever purchased something in a currency other than your local currency.

The pros of trading cryptocurrencies

High potential returns: Digital currencies are well-known for their immense volatility, sometimes seeing significant price swings within brief intervals. These price changes give the potential for substantial returns for experienced traders to take advantage of. However, trading crypto can also lead to substantial losses as well.

Flexibility & decentralization: Unlike conventional financial markets, the environment in which cryptocurrencies function is both decentralized and uncontrolled. This gives traders more freedom and flexibility in their investing decisions and methods.

Less expensive transactions: In comparison to standard financial markets, digital currency trading platforms often charge less for each transaction. In the long term, this cost-effectiveness can potentially help traders save money.

Fast & safe transactions: Blockchain technology speeds up and strengthens the security of Bitcoin transactions. As a result, the possibility of deception or fraud is decreased.

The cons of trading cryptocurrencies

Risks associated with market volatility: The market’s extreme volatility can be a serious concern. Traders may suffer significant losses if they don’t use effective risk management techniques.

Uncertainty around regulation: Traders may be exposed to potentially fraudulent activities because of the regulatory uncertainties surrounding cryptocurrencies. This highlights the significance of conducting research before purchasing any digital assets.

Limited availability of trustworthy information: Given the digital currency market’s young age, it might be difficult to get accurate data. In order to make informed choices, traders must be careful in their search for reliable sources.

Differences between forex and crypto

Although the forex and cryptocurrency markets share some characteristics, such as being influenced by market supply and demand, they also differ significantly in certain ways. Read about their key differences below:

Participants in the market

The FX market is made up of a number of entities. These include commercial and central banks, investment funds, businesses, and small and medium-sized traders and brokers.

Each participant in the foreign exchange market has a specific function in the market. Commercial banks serve as the main center for the exchange of currency pairs that are traded on a global scale, for instance.

Central banks engage in this market not for their own benefit but in order to stabilize the value of the national currency, which has an effect on the economy of the nation.

Exchanges, miners, and traders are the three different categories of participants in the cryptocurrency industry. Exchanges are online markets where cryptocurrencies may be bought and sold. Crypto miners are either individuals or businesses who complete the blocks needed to validate transactions on the blockchain network.

On the other hand, cryptocurrency traders don’t really hold the underlying cryptocurrencies; instead, they speculate on the price movement either upward or downward.

Difference in size

The forex market is huge, primarily because it consists of transactions from global organizations, including companies, financial institutions, investors, funds, and people, who rely on this system in order to trade foreign currencies in real-time.

The cryptocurrency sector has come a long way thanks to the growth of blockchain networks. The market for cryptocurrencies was estimated at $1.5 billion globally in 2021, and it is anticipated to increase to $2.3 billion by 2028.

Structure of the markets

The structure of the foreign exchange and cryptocurrency markets is mostly influenced by supply and demand, which affects how traders may agree on a price without asking permission from regulatory bodies. You can trade forex and cryptocurrencies over the counter (OTC), through an exchange, or through a brokerage.

Since neither the forex nor the cryptocurrency markets are issued by a single central body like the government, neither market is controlled by a single party. Especially in the case of cryptocurrencies, some people view this transparency as the market’s power.

Cryptocurrencies, as opposed to conventional currencies exchanged on the foreign exchange market, are primarily only present in the digital world and are maintained on a blockchain. Only digital wallets may be used to transact in cryptocurrencies, and after they have been mined, they are validated.

The majority of the forex market structure is governed and found in regulated marketplaces. Cryptocurrencies, on the other hand, have a more informal framework, making them more vulnerable to fraud and/or criminal activities.

Asset accessibility

Comparing the forex market to digital currencies like cryptocurrencies, the forex market offers more accessibility. You may trade more than 80 of the available exchange currency pairs with an online CFD broker like IronFX for example.

Major pairs include the AUD/USD, EUR/CHF, and EUR/GBP. The less significant pairs include the CHF/JPY, CAD/CHF, and CAD/JPY. Those that are considered exotic are the CHF/HUF, EUR/CZK, and EUR/HUF.

Cryptocurrencies are less liquid. Additionally, in order to trade, they need wallets and exchange accounts, both of which have deposit restrictions and can be pricey to maintain.

More than eleven thousand cryptocurrencies, including popular ones like bitcoin and ether, are frequently exchanged on the blockchain, in contrast to the relatively few foreign exchange currency pairs that are available globally. This makes it difficult, even impossible, to follow the Bitcoin market as a whole.

Market volatility

Although both markets are prone to volatility, forex pairings show less volatility than cryptocurrencies do. As a result, it is very possible that even the smallest changes in the market will have an impact on cryptocurrency values, causing significant fluctuations during a single trading transaction.

On the other side, forex pairs see frequent moves within tighter ranges and significant daily transaction volumes. In addition to cryptos, this high volatility rate relative to other types of assets is what draws many traders.

风险提示：
Cryptocurrency CFDs are an extremely high-risk, speculative investment and you may lose all your invested capital. Before trading, you need to ensure you fully understand the risks involved taking into consideration your level of experience and investment objectives. Seek independent advice, if necessary.

免责声明:
This information is not considered investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced or hyperlinked in this communication.