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Crypto and forex have emerged as two of the most popular ways to invest over the past few years. From new, young traders to experienced old-heads, both are relatively easy to get into and have proven to be excellent choices for making a profit.
However, there are a few fundamental differences between foreign exchange and crypto. This post will discuss those differences and help you decide which one is best for you.
Options
The first big difference is how many options there are to choose from. Forex works in pairs; therefore, you arenāt investing in a single currency. While there are dozens of currency pairs to choose from, you are still limited.
However, with crypto, depending on the marketplace and platform you are using, you could choose between hundreds, if not thousands, of different coins and tokens. There is substantially more choice and price points in crypto compared to forex.
Volatility
When it comes to volatility, the most volatile option is definitely crypto. Since forex is backed by entire economies as you are trading their economy, they are far more stable than crypto, which, at the moment, isnāt supported by much.
While forex will still have its ups and downs, it will not crash and go to zero like so many crypto coins and tokens have.
Liquidity
When it comes to investing and trading, liquidity is what helps you enter and exit positions. In simple terms, liquidity is how much of the thing is out in the world; the higher the liquidity, the better.
While both markets have very high liquidity, forex trades average $6.6 trillion daily, while crypto hovers between $100 billion and $500 billion. The more liquidity there is, the more you can buy and sell.
Coin Variation
A sector that crypto wins in is how different each coin is. Currency is currency; while the dollar may be worth more than the rupee, they both function the same way. Within crypto, coins are created and used for a variety of reasons.
Coins are created as part of a project, with this project either being a game, a virtual world, a security system, or any number of other things.
Consistent Profit
The main reason anyone would invest in either of these is for a profit. While profit is never guaranteed and you never know what will happen, if you have to compare the two, forex offers consistent profit while crypto can be more hit and miss.
This is simply down to how each is operated. Forex works in relation to economies and therefore is a bit easier to predict, and you can see where you will and wonāt make money. Crypto is very different, though, and that can be for good or bad.
While there can be a massive spike for whatever reason, such as a tweet or a funny meme that gets taken too far, there can also be drops, many times for no reason. These drops can also destroy a token entirely, with investors missing out.
At some point, crypto will become more stable and consistent, but that point isnāt now; therefore, forex is for you if you want consistency over time.
Security
Market platforms, trading websites, and crypto companies themselves are still trying to work out the kinks in security. We often hear stories of a site or wallets being hacked and millions in crypto disappearing.
There is also the question of regulation. Forex is highly regulated, and there are legal protections in place for everyone involved. The same canāt be said about crypto at the moment, where regulation is next to non-existent.
This has led to multiple so-called ārug-pulls,ā which lead to hundreds, thousands, or even tens of thousands of people losing money. The crypto market is also flooded with scam coins, which should already be banned.
Entry Requirements
Finally, which of the two is easiest to get into if you are a beginner? The short answer is crypto due to the way you invest and how you make money. It is as easy as buying Ethereum or Bitcoin and then waiting.
Forex requires a bit more learning and some trading skills. While anyone can learn these skills, it takes time to become proficient. This shouldnāt be a turn-off for anyone, but if you just want to invest and then forget about your money, crypto is for you.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.