Published on: October 14, 2022
Author: Laura Brocca
|Table of Content
|What has more tradable assets – forex or crypto?
|Featured low spreads forex brokers
|What is a safer trade – forex or crypto?
|Which is easier to trade, forex or crypto?
Cryptocurrency is one of the newest forms of trading available on the market. Compared to forex, it is still a relatively unknown quantity. We mean this in terms of market potential and potential future investment. Forex is one of the old traditional forms of trading, and the first forex market originated centuries ago.
Cryptocurrency was initially created in 2008. The first and most well-known cryptocurrency is Bitcoin. The origin is something that is still debated to this day. The original design, also known as a white paper, was published online under the pseudonym of Satoshi Nakamoto. The identity of this creator is still a mystery, so much so that nobody knows if it is one person or a group of people. Let's take a look at some comparisons between trading forex and trading crypto.
This is a good question. Despite the fact, there are hundreds of foreign currencies and thousands of cryptocurrencies. The legitimacy and quality of some of the assets imply that not all of them are tradable. The main currencies in forex are:
The US Dollar & Japanese Yen: USD/JPY.
The Euro & US Dollar: EUR/USD.
The US Dollar & Swiss Franc: USD/CHF.
The Great British Pound & US Dollar: GBP/USD.
The New Zealand Dollar & US Dollar: NZD/USD.
The Australian Dollar & US Dollar: AUD/USD.
The US Dollar & Canadian Dollar: USD/CAD.
All of these currencies are tradable and have high levels of liquidity and billions of dollars worth of volume per day. Therefore, there is virtually no issue when it comes to trading them. Despite other countries' currencies being available, the same liquidity doesn't exist. You may encounter some difficulty if you're looking to trade volatile and lesser-known currencies.
The same applies to cryptocurrencies on a broad spectrum. However, the risks are more considerable. Despite being legal in a number of different territories and having a market cap that exceeded $1 trillion in 2021, Bitcoin is one of the most volatile assets available.
A host of other cryptocurrencies, such as Ethereum, will have enough liquidity to ensure your trade is executed. However, due to the regulations that aren't as watertight as traditional financial markets such as forex, there may be times when your assets drop and rise 30/40% in the same week. This fluctuation in the exchange rate indicates serious issues with countries' economies. But in crypto, it is just another day. If you can time it, you stand to make a serious profit.
A low spread is when the bid price and ask price are fairly close. Ideally, you want to enter a forex trade when spreads are low. This is generally the case during major forex sessions. This tends to be when the European and American markets are operating during business hours, and there is a timezone crossover. A low spread points toward easily accessible liquidity and small amounts of volatility.
The forex pair that is easier to exchange is the Euro and US Dollar. This is due to the stability and the high amounts of liquidity it holds. This is one of the most traded currency pairs due to tight spreads and liquidity and is popular amongst all types of traders with varying levels of experience.
If you're going to look at both types of trading at face value, you would have to say forex. The markets are more established, subject to tighter regulation, and have a much higher volume over 24 hours than cryptocurrency.
However, this is a basic statistical analysis. The safety of a trade relies more on you, your preparation, and your ability to read a market than on whether the market conditions are suitable are not. Clearly, this also needs to be a factor, but there needs to be a collective selection of factors for a trade to succeed.
Theoretically, if you trade USD/EUR, this would be considered a safer trade than, let's say, a Bitcoin swing trade. However, this is unsafe if you go blindly into a USD/EUR trade with no prior market research. Especially if your Bitcoin purchase is based on market research, there will be a large institutional investment and a Bitcoin halving on the horizon.
In this scenario, the safer trade would probably be the Bitcoin trade. So it is all relative, but forex is probably slightly safer in a broader general sense.
you might find it safer to trade options instead of forex.
If you're looking for a simple buy and sell, there are positives and negatives to consider with both forex and crypto. Each of these markets is open 24 hours a day, so it is easier for you to trade in your own time than other markets, such as stock trading.
Depending on what you're more comfortable with, you will find one more straightforward to trade than the other. As long as you conduct suitable research into each field, you shouldn't have too many issues with one over the other. Especially if you use a mobile trading app that lets you keep an eye on all types of assets, be it crypto, forex or commodities.
Forex is probably easier to trade as you will not have issues with liquidity, and the market does not experience anywhere near the same levels of volatility. The cryptocurrency market has been known to drop by as much as 50% over the course of a week.
The same issues do not exist in the forex market. Any serious volatility is usually corrected due to the phenomenal levels of institutional investment from hedge funds, investment banks and central governments. Whilst some institutions are involved in cryptocurrency trading, it hasn't seen the same mass adoption levels.
There are also additional factors, such as central banks intervening and adjusting interest rates. In addition to this, central banks such as the Bank of England will look to introduce deflationary tools to stablize the currency if its experiences volatility. In the world of cryptocurrency, its entire decentralized nature, which is a positive, suffers from this lack of intervention but is considered more of a pure market.