Forex Vs. Crypto Trading – Which Way Should You Go?

By Jon Dela Cruz

Investing, to some degree, is like gambling. You continue to take calculated risks and determine at different stages when you should invest more or hold on for some time. People who invest in the forex market, or are planning to, are now looking at what crypto trading has to offer. While there are similarities between the two, there are differences that you should know about before taking the plunge.

Variety and Volatility

With over 2,500 cryptocurrencies on offer, selecting one or more based on future performance can be a daunting task. Forex trading, on the other hand, often involves trading in a few major currency pairs along with some minor or exotic currencies. Besides, while forex trading has been around for a while, the crypto market is relatively new, and typically more vulnerable to volatility. Investing in both requires that you keep a close eye on the markets. Alternatively, you may consider getting trading bots to do the work for you.

The Time Factor

Forex trading usually requires that you make short-term investments. In several scenarios, you may wait no more than a few days to capitalize on the small profit margins that come your way. With forex trading, you tend to make more money when you trade more. Given the higher volatility that cryptocurrencies tend to experience – with their prices skyrocketing or plummeting in a few hours – you need to look at your investments from a long-term perspective. This could be several months to even a year or more.

Liquidity

The forex market is highly liquid, and you may look forward to completing trades in near real-time. However, when it comes to cryptocurrencies, especially the ones that are not very popular, you may find a significant gap when it comes to liquidity. This might expose you to a noticeable bid-ask spread. However, following the right kind of trading strategies ensures that you do not suffer because of higher spreads.

Middlemen

When you trade in forex, you typically end up using the services of a broker or a trading firm, which comes at a cost. With crypto trading, there is no need for a middleman and you may carry out your trades directly through a cryptocurrency exchange. This makes your trades more cost-effective in terms of fees and charges.

Security

Forex trading comes under the purview of various regulatory bodies around the world. In some countries, investors may even look forward to deposit protections in case their FX brokers face insolvency. Trading in cryptocurrencies does not come with the security of financial regulations and protections yet. In addition, investors also need to worry about security breaches when it comes to cryptocurrency wallets and exchanges.

Conclusion

While the forex market offers relatively safe investment alternatives, there is no denying the fact that people have made a fair amount of money by investing in cryptocurrencies. Forex trading tends to find favor with day-to-day traders, whereas crypto investments are typically looked at from the long-term perspective. Incidentally, investing in both requires that you remain diligent and carry out the required research.

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About the Author

Jon works as a researcher with iCompareFX, an online platform that lets its users compare the world’s leading overseas money transfer companies. In his free time, Jon likes exploring new music from different genres.