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The forex market and the cryptocurrency market has attracted many trading enthusiasts in recent years. While these two markets share a lot of similarities, there are still some important differences that set them both apart. It is important to know the differences between these two markets especially if you are keen on making an investment. Here is a quick breakdown of the two markets in an effort to bring out the differences.
The Background of the Markets
History provides a great deal of information about conflicting concepts. Historically, the forex market is older than the cryptocurrency market. Traditional currencies have been exchanged by humans for a long time and it is only in the 20th century that the mode of exchange moved from over-the-counter to the online realm. At the turn of the 21st century, technology was still evolving, and new innovations were shaping up the financial world.
The concept of virtual transfer of currency thus not only led to efficiency in the forex market but it also heralded a new dawn for cryptocurrencies. In 2009, the first cryptocurrency, Bitcoin (BTC), was born as a result of these developments. Bitcoin thus became the standard means of making digital payments in certain areas of the internet. The cryptocurrency market has since then evolved with many other alternative currencies being born.
The Market Capitalization
After that short history, it is vital to know the differences that define the Bitcoin and Forex markets. To start with, the markets for both traditional currencies and cryptocurrency are preferable when they are huge. Big markets translate to higher liquidity levels and thus have stability. Forex is, nevertheless, the largest market when compared to Bitcoin. This is because the whole world participates in it and it is the traditional market that moves economies. Any trader willing to venture into the market is able to open a forex demo account and kickstart their trading journey without much investment.
With technology, the forex market has become a behemoth where the volumes are now at the peak levels. A number of dominant global currencies have also established themselves and some of them include; the US dollar, the British pound, the Euro and the Japanese Yen.
In comparison, the daily volumes of BTC are nowhere near the average volumes of the forex market. The value of the Bitcoin is nevertheless quite big, averaging $4,000 a piece in recent years. The total market cap has also risen to over US$70 billion with the daily turnover averaging US$1 billion. This is a far cry from the least traded currency at the forex though. The Swiss franc sees a daily turnover of around US$243 billion despite it occupying the bottom position in the forex market.
Advantages and Disadvantages of Trading Bitcoin
Bitcoin might be no match for the forex market in terms of depth, but this does not mean it does not have its advantages. To start with, the shallowness of this market has benefits for traders. These pros include:
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There is easy access to the market
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The costs of doing trade are quite low
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The market is volatile and this makes it ideal for daily trade
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Bitcoin is independent of economic and social limiting factors
On the downside though, there are also some disadvantages associated with trading Bitcoin and they include:
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Fraud is still a challenge as hacking threats are common
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The complete reliance of internet infrastructure makes Bitcoin prone to glitches
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The access to leverage is limited or non-existent
Advantages and Disadvantages of Forex Trading
The forex market is the traditional currency exchange market. This market has the largest capitalization and it has great depth. There are many benefits that traders can enjoy in this market. Some of these advantages include:
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Access to leverage
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The market is diverse with many different currencies
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Great liquidity and stability allows for traders to do versatile trade
As great as it is, the forex market might not be for everyone. The following are the disadvantages of forex trading:
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The competition presented by institutions is stiff for retail traders
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There are several fees and costs associated with the trade
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Low price volatility levels affect profit-making
In Summary
Even though both the forex market and the cryptocurrency market are now operated online, there are still vast differences between the two. This does not mean that either of the markets is bad for investment though. With the right information, either market can be great for generating an income.
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.