Should I Invest In Forex or Crypto Currency?

Should I Invest In Forex or Crypto Currency?

Forex and Crypto world have their share of followers. But, which platform do you think is the best to invest your hard-earned money?

Today, Forex is more than a trading platform for foreign currency that you carry while traveling to other countries. Forex is a trading market existing for decades, and currently, it is one of the largest markets. But since the launch of cryptocurrencies in 2009, the trading market has changed a lot. Even though the Forex and the cryptocurrency market are separate, choosing between these two may not be a straightforward decision. Forex and cryptocurrency are different from each other, but they share some similarities too. This article will help you to determine if you should invest in Forex or Cryptocurrencies.

Forex Vs. Cryptocurrencies:

Forex and cryptocurrencies are both fast-paced, productive, and have created a tremendous buzz around them. The interest around both is not going to fade any time soon. Here is a list of their essential features.

Brief Description:

The Forex market is the largest and most liquid financial market in the world, trading over $5.3 trillion Forex every day. It is a global market where currencies from all over the world are exchanged. Forex trading is done in a decentralized network over the counter (OTC), meaning all transactions are done electronically among traders from different countries.

In cryptocurrency trading, decentralized digital currencies, known as cryptocurrencies, are exchanged. The first and highest valued cryptocurrency is Bitcoin. For trading cryptocurrencies, you will need a verified account. You can use the cryptocurrencies to exchange for another trending cryptocurrencies or use them at outlets that accept them as payment. For this, you need a digital wallet where you can store and exchange the cryptocurrencies.

Similarities between Forex and Cryptocurrency trading:

  • Both financial assets require a broad understanding of all trading factors in the market.
  • Forex and cryptocurrencies transactions are done online, so have easy accessibility. The trades can keep a close check on the trades.
  • Both assets take a short amount of time to carry out the trade.
  • Forex and cryptocurrency both are highly volatile, which means there can be a considerable amount of price changes in a short period, based on various factors.
  • Both Forex and cryptocurrency trading can be done using multiple currencies.
  • Trading, whether it is Forex or cryptocurrency, needs traders to be prepared for drops in the market. When trading in both markets, traders should be observant and avoid impulsive trading.
  • Forex and cryptocurrency trading needs the usage of multiple digital platforms.

Differences between Forex and Cryptocurrency trading:

Even though Forex and Cryptocurrency share a lot of similarities, they are very much different from each other. Here is a list of their differences that can help the traders understand them better before choosing either one.

Forex Trading:

  • Extensive Supply: Forex market can trade currencies from all over the world, and hence there is a large supply of Forex available for trading. Traders can choose combinations of different Forex currencies that operate well for them.
  • Leverage: Forex market allows traders leverage of 50:1, so you can trade Forex for a position worth $50 for just $1. This means losses can intensify quickly, but so can the profit.
  • Not new in the market: Forex trading is in the market for decades, so it is relatively stable than cryptocurrency trading. Forex trading is popular because it is relatively easy to understand and simple to trade as compared to the new digital currencies. For this reason, the Forex market’s daily turnover is much higher than the cryptocurrency market.
  • High liquidity: Forex market has traders from diverse parts, which makes it easy to buy, sell, or exchange the Forex, even in large amounts. Unlike the cryptocurrency market, the Forex market is not influenced by a single investor.
  • Governed by the center: the centralized government supports forex, you can rightfully trade any foreign currency for another one. There is no risk of any Forex assets going out of the market as in the cryptocurrency market.
  • Influenced by global changes: Forex trading can be affected by various factors as political decisions, geographical conditions, economic events, and relations between the countries.

Cryptocurrency Trading:

  • Limited supply: The cryptocurrencies are higher in prices as all of them are have limited supply. Limited supply increases the demand, as in the case of Bitcoin.
  • Liquidity: Cryptocurrency trading is new in the market, not many people are aware of it, and it is complicated to understand as compared to Forex or other financial assets. Due to this reason, it does not have as high liquidity as Forex.
  • Decentralized: Any centralized authority does not govern cryptocurrencies; no banks or thirds party vendors charge you for the transactions. So, cryptocurrency transactions are faster and cheaper. 
  • Massive gains: With Cryptocurrency trading, traders can earn massive profits. Traders who invested in Bitcoin at the launch can see the difference in the prices today. But it also comes with a considerable risk; not all cryptocurrencies can show price hikes as Bitcoin.
    Location dependent: Though political decisions do not influence cryptocurrencies; it is dependent on the location you are trading from. Cryptocurrency trading is not permitted in many countries, which means you may not be able to use the cryptocurrencies you have earned.
  • New in the market: The first cryptocurrency was launched just about a decade ago and has gone through a lot of up and downs since. As cryptocurrency is not dependent on banks, it is emerging as an alternate source of funds. This is a huge change from the time when it was only used in the black market.

Conclusion:

Whether you choose Forex trading or cryptocurrency trading, you need to understand they both have their own set of risks and rewards. While Forex trading is stable and controlled, cryptocurrency trading can provide more significant returns. The Forex market has better liquidity, whereas cryptocurrency trading can be cheaper. Both markets are rapidly changing, so one should measure the risks the current situations are posing before investing in either financial asset. The answer to is Forex Trading profitable than Cryptocurrency trading depends on your capability to take risks and personal goals.

1 Comment

  • Daniel , May 14, 2020

    I just started learning about cryptocurrency and this article helped out a lot, thanks! Bookmarked.

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