New methods of investing, managing, and transacting money are coming out as the financial world in 2022 evolves. The biggest and the most exciting change in the past decade has emerged from the rise of crypto- the digital currency.
Over the last few years, cryptocurrencies have become mainstream and trading in digital currencies has significantly grown. The growth in cryptocurrency investment has increased the total market valuation of crypto above 3 trillion USD.
The significant rise in blockchain technology has caught the attention of traders, who do not want to miss out the huge profits.
Crypto trading is vastly different from forex trading, where the exchange rates between the currencies scarcely move. The leverage in the forex is the thing that attracts the traders.
Both forex and crypto are the two riskiest yet most profitable financial markets in the world. The article describes the differences and similarities between the two asset classes so that you can make a wise decision.
Differences between Crypto and Forex Trading
1- Number of Available Instruments
The major difference between the forex and crypto markets is the number of accessible instruments. Forex trading usually occurs in currency pairs like USD/EUR, USD/CHF, GBP/USD, USD/JPY, USD/CAD, and others. Nevertheless, the options are very limited.
On the contrary, there are over 11,000 different cryptocurrencies are available in the market. The number of cryptocurrencies is growing so rapidly day by day that it is hard to keep the count. However, there are only a few cryptocurrencies that are being actively traded in the market including Bitcoin, Ethereum, Ripple, Litecoin, etc.
In short, the crypto market offers a vast range of currencies to trade in comparison to the forex market.
The forex market is the most liquid financial market in the world. The trading volume of the forex market has exceeded 6.6 trillion USD back in 2019. The highest liquidity gives the advantage to the trader to easily buy or sell the currency pairs at the desired prices.
In contrast, the liquidity of the crypto market is very low due to which traders may not get to exit at their desired prices.
The Crypto market is more volatile than the forex market. The forex market usually remains stable. But if you look at the crypto market, you would see huge ups and downs only.
Similarities between Crypto and Forex
Both forex and crypto markets are decentralized which means that there is no centralized regulation exists in these markets. So, traders need to be very careful with their investments.
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2- Similar Market Operation
Both markets operate alike. Both crypto and forex markets work on the basic principle of supply and demand. If the number of buyers is more than the number of sellers, the prices go up. And in case the number of sellers is more than the number of buyers, then prices go down.
The world news also affects both financial markets.