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Crypto vs. Forex: The Key Differences You Should Know

How Is Crypto Trading Different From Forex?

When it comes to online trading, there are a lot of options to choose from. But two of the most popular choices are crypto and forex trading. The foreign exchange market is a well-established market with over $5 trillion daily fx trading volume.

However, cryptocurrency trading has become a huge part of today’s financial market. As more people understand how this technology can help them, they begin to trade in crypto.

This article explores the key differences between cryptocurrency and forex trading. We will cover all the bases, from asset types to market volatility, so you can learn everything you need about these two popular trading options.

What Is Cryptocurrency Trading?

Trading in cryptocurrencies includes purchasing, selling, and exchanging digital assets. These actions occur on specialized platforms and exchanges serving as market makers, bringing buyers and sellers together. Crypto trading usually involves three types known as spot trading, futures trading, and peer-to-peer trading.

There are thousands of cryptocurrencies today, with bitcoin holding the largest market share. In the past five years, the extreme volatility of cryptocurrencies has attracted many traders, allowing them to conduct technical and fundamental analyses on the cryptocurrency market to make profits.

What Is FX Trading?

Foreign exchange, or forex, refers to the market where various currencies are traded via an intermediary known as a broker. Because currencies fluctuate in value relative to others, the value difference generates a worldwide market for exchanging currency pairings.

The currency market is valued at trillions of dollars, providing traders with several trading options. Modern forex trading includes analyzing currency pairings and other assets using charting and technical analysis software. Thanks to technological advances, the forex market is accessible to nearly everyone.

Differences Between Crypto vs. Forex Trading

The distinctions between cryptocurrency and forex trading are large enough to impact your market knowledge. Among these differences are:

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The degree to which traders may purchase or sell assets in a market is known as liquidity. Liquidity is a major factor determining a market’s efficiency and ease of trading. The FX market is more liquid and efficient than the cryptocurrency market because it has more participants.

There are many traders on both sides of every transaction in the FX market. But in the crypto world, only a handful of traders are on both sides of every transaction. Only a few cryptocurrencies, like BTC, ETH, and USDT, have sufficient liquidity to ensure smooth exchanges.

Market Capitalization And Volatility

The FX market is worth significantly more than the crypto market. With a market cap valued at over $2 quadrillion, the forex market is relatively stable and resistant to unpredictable fluctuations.

The significant difference in market capitalizations between the two is an essential determinant in market circumstances. On the other hand, the crypto market is valued at over $1 trillion and is extremely vulnerable to market fluctuations. This accounts for the tendency for unpredictable market gains.

Decentralization And Regulation 

It is not surprising that the government heavily regulates the global FX market because currencies can impart the economies of a nation. On the other hand, the cryptocurrency industry is mostly deregulated. Crypto trading is still in its early stages, and although each region has some form of regulation, most nations are yet to control it completely.

The decentralization of the crypto industry is one of its major features as it seeks to establish a financial market not regulated by the government.

Trading Tools

Forex traders have access to multiple trading platforms to execute their trades in various ways. In addition, most brokers offer an array of features such as streaming real-time data feeds and charting tools that allow traders to execute their trades faster and more efficiently.

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Crypto traders do not have access to these same types of trading tools. However, they can use their software solutions to track their profits and losses and set up alerts on price movements that may signal an opportunity for profit taking or risk management purposes.

Forex traders can trade a wide variety of fiat currency pairings. The USD is the most traded currency, accounting for around 90% of all forex deals. 

Alternatively, there are many more coins in the crypto market than currencies in the forex market. With over 14,000 coins available for trading, most are traded against Bitcoin, Ethereum, or USDT.

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Market Influencing Factors

The market movement, such as the spread between currencies, determines trading conditions in forex trading. Market movements are controlled by forces caused by economic factors or by political events. There is no spread in cryptocurrency trading, but there are slippage levels and market sentiment. 

Platforms And Exchanges

There is no standard set of terms and conditions for trading on the forex or cryptocurrency markets, and conditions might fluctuate from broker to broker or exchange to exchange.

Traders need a platform to trade the forex and crypto markets. In forex, such platforms are called brokers, and in crypto, they are called exchanges.

Market Availability

Market accessibility is one of the most important differences between forex and cryptocurrency. While FX is only open five days a week (24/5) and closed on holidays, the crypto market is constantly active (24/7). The accessibility of the markets has an impact on your trading strategy as well as your ability to execute trades quickly when needed.

The Bottom Line

Crypto trading and forex trading are both great ways to make money. They differ in some features, but they are similar in that they offer amazing profit opportunities.

If you are interested in either market, having the requisite knowledge and technique determines how well you maximize your returns. Therefore, to be successful in either market, you must learn everything you can about that market.