If you are considering investing in forex or crypto trading, many considerations must be made beforehand. Both markets can be volatile and complex; both markets offer risk but can provide greater liquidity than their counterparts; forex offers more structure while cryptos provide much-needed potential but come with their own risks.
In this article, we compare forex and crypto to help you select which market best fits your needs. From basic concepts and structures of each to their primary participants and structures, this guide covers it all!
The forex market is well established, with banks at the top and retail traders at the bottom forming an established hierarchy that provides traders with transparency to help make informed decisions. Conversely, cryptocurrency markets tend to be less mature and feature an unclear hierarchical structure with multiple players such as digital marketplaces, miners (who verify transactions), and traders speculating on price changes all playing their parts in this space.
As such, the cryptocurrency market can be more unpredictable and experience larger price swings than forex trading markets, making it less regulated and making it more challenging for new traders to understand and navigate successfully.
Though both markets differ significantly, they still share similarities. Both operate based on supply and demand principles: when there are more buyers than sellers for any currency pair or cryptocurrency coin, its price will increase; conversely if more sellers than buyers for said coin exist, its price decreases accordingly. Furthermore, both markets react instantly to news or events which impact underlying assets they represent.
In such an instance, should US president announce war against Iran, this could trigger an increase in USD/Iran exchange rates due to being seen as a safe haven in times of political upheaval.
Furthermore, both markets are highly liquid and provide leverage – two essential characteristics for diversifying your portfolio and expanding exposure to different economies globally.
Both forex and crypto markets can provide traders with tremendous rewards; however, both can also be highly risky investments that could cause financial ruin if careless decisions are taken. It’s therefore vital that any trader conducting investments research both markets before investing their funds.
By following these simple guidelines, forex and cryptocurrency traders can increase their chances of success on both markets. You should only trade with brokers that require at least $10,000 as minimum capital requirement – this will protect against losses in case any occur. Also be mindful to comply with know your customer laws to avoid money laundering schemes using your funds for illicit purposes – thus increasing your odds of success in both forex and crypto trading markets.
