Forex Blog

The Differences & Similarities Between Crypto and Forex

July 3, 2022 | 4:05 pm | Forex Blog
July 3, 2022 | 4:05 pm
Forex Blog
The Differences & Similarities Between Crypto and Forex

Crypto and Forex

Over the past 5-7 years, cryptocurrency platforms have become more common. Alternative payment tools are being introduced into various industries — game development, digital art, banking, marketing, etc.

Thousands of Forex traders wonder if they should focus on the crypto markets to improve their prospects in terms of financial transactions.

Let’s dig deep to get answers to important questions about crypto and forex.


Definition of Terms & Key Differences

To benefit from both solutions, let’s figure out the definition of each of the terms. Only by understanding the Forex markets and the Bitcoin ecosystem in detail can people claim the resemblance between such assets. But to clarify the benefits, experts shouldn’t have to be biased.

If you want to prevent disappointment, consider the following:

Forex vs. Cryptocurrency

Despite a lot of similarities, the key differences between crypto and forex perspectives are significant. It’s mostly about the payment gateways and the speed of decision-making.

One of the most essential parameters for the newbie is the nature of over-the-counter deals. Moreover, the crypto and forex markets change in different ways with global economic trends.


Market Structure & Asset Holders’ Preference

Experienced traders will avoid cases when they are offered sold and bought assets directly between brokers or parties. However, if we are talking about cryptocurrency, this method is acceptable for 20-30% of market participants. Although such an option is not non-alternative, most crypto enthusiasts can register on different exchange platforms.

Each newcomer chooses the most acceptable conditions based on the following:

  1. Platform margin (1-7%)
  2. The amount of investment
  3. Availability of the financial tools
  4. Type of trading platform — Market Maker, STP, ECN.
  5. Region of registration certificates issuance

To trade cryptocurrency, asset holders do not have to go through the routine registration procedure, which involves the verification of various documents like agreements with payment service providers (PSP). They negotiate prices based on demand and needs without government oversight.

As for Forex, most holders prefer to distribute their assets in different markets, they use 3-5 prop firms and brokerage accounts. The operation of such platforms is regulated by the state, and US law punishes attempts at financial fraud.


crypto and forex traders distribution
The Distribution of Forex and Crypto Traders (Daily)

Crypto vs Forex Holders

How assets are used is not the only distinguishing feature of Forex. Beginners can read 3-5 reviews of a particular platform to clarify this.
Bidders in top-10 markets are not the same; they have different preferences and competencies.

Global trading involves not only individual investors but also large state and institutional players:

  1. Government of a specific country. Such institutes play an important role in trading as they provide the markets with liquidity. Governments use trading platforms directly or indirectly to achieve their economic goals. For the cryptocurrency market, the influence of states is not so significant. Although, in the last 5 years, we had significant changes in terms of regulation and adoption of decentralized payment tools.
  2. Banks and lenders. Such institutions may speculate or invest in Forex. Corporations that operate in US and EU markets use digital platforms to protect their profits from expected fluctuations. For the crypto ecosystem, such tools do not work — the price of most coins is impossible to predict. Exchange rate fluctuations depend on a huge number of factors — statements by influencers, government regulation, launching new projects, etc.

Holders from governments, global investment funds, banks, and US-based corporations have a much smaller share of the Bitcoin market than the Forex. This is paradoxical, given the information boom regarding cryptocurrency.

Less than 15% of all BTC mined belong to enterprising investors. Although capitalization increases by 5-7% every year. Just look at the dynamics of rates through the ICOholder platform to be sure. Most financiers are sure that the balance between crypto and forex will come in 7-8 years.


Market Hours & Globalization

The crypto platforms are open 24/7, while Forex is available 24 hours a day, 5 days a week. So we have a difference in terms of getting a payment that determines daily and weekly trends. No doubt, most crypto ecosystems are more sensitive which is not the case for Forex. The purchase of cryptocurrency can be a spontaneous decision, unlike the acquisition of other assets.

According to a recent three-year survey of central banks by the Bank for International Settlements, more than $6 trillion has been traded daily in the OTC Forex since 2019. The cumulative daily volume of the crypto market in September 2021 was $1.3 trillion. But this does not mean that large investors are not interested in cryptocurrency. This ecosystem has rapidly grown with global corporations — Tesla, Facebook, Coca-Cola, and others.


Payment Security Issues

Cryptocurrency platforms are still at an early stage of development. On the contrary, Forex is highly supervised to conform to rules. But regardless of the preferred site, some enthusiasts may face unscrupulous counterparties and e-wallets hack risk. That’s why newbies should check any broker’s background and relevant laws in a specific region to avoid falling.

People who prefer cryptocurrency trading apps may not be able to withdraw their funds to e-wallets. It’s due to the specifics of storing private keys. So, when traders want to transfer their coins through exchanges, such platforms as Finance and Coinbase will be useful. Depositing and withdrawing funds from Forex accounts is more simplified. Most investors can make ACH transfers from their bank cards or wire transfers. But this does not mean that asset holders have no challenges. All newbies still have to verify their account, strictly adhering to the terms or contact intermediaries.


Key Takeaway

Ten years ago, discussions about cryptocurrencies were mostly on online forums. Now, the situation is more promising. As the privacy issue is being addressed, theft and fraud prevention steps are being taken, and more and more people are interested in Blockchain, including large investors.

The coming years’ global challenges could drastically affect the way crypto is regulated and issued. So, Forex traders who want to diversify their markets should definitely follow such trends.

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