Crypto Market vs Forex Market: Similarities & Differences

Fiat currencies and the forex market have been around much longer than cryptocurrencies and the cryptocurrency market; but over the past few years or decade, cryptocurrencies have been making an imprint on society and become mainstream.

Sometimes, traders get into a fix: they wonder whether to focus on the crypto market instead of the forex market, or vice versa. They even wonder whether to diversify more by focusing on both worlds—crypto and forex markets! As a result, many forex brokers offer cryptocurrency services to their forex customers.

Regardless of whether you eventually decide to focus only on the crypto market, or only on the forex market, or on both worlds at the same time, it’s essential to take note of the similarities and differences between the two respective markets which are actually two different financial instruments that require different approaches during investment.

Similarities between the crypto market and the forex market

The main similarities between the crypto and forex markets include, but may not be limited to:

1. You can trade online on the crypto market and forex market, respectively.

2. To start trading, you need a modern electronic device and stable internet connection to open a trading account.

3. Both the crypto and forex markets are influenced or driven by the market force known as “supply and demand”—i.e., the supply-demand balance. This implies that there are usually price fluctuations: the prices of cryptocurrencies and fiat currencies rise when there are more buyers than sellers; on the other hand, their prices drop when sellers are more than buyers.

4. Both crypto trading and forex trading (on their respective markets) carry a certain amount of risk.

Differences between the crypto market and the forex market

The main differences between the crypto and forex markets include, but may not be limited to:

1. In terms of size, the forex market is far larger than the crypto market. In fact, the forex market is by far the largest market in the world, and no cryptocurrency comes even close to it. However, this doesn’t imply that one can make more profit from the forex market just because it’s much larger than the crypto market. Daily fluctuations in the respective markets make them riskier and harder to predict.

2. The forex market is an extremely liquid market, far much more than the crypto market. This implies that you’d easily be able to buy or sell the forex asset (fiat currency) of your choice, and trade at a price equal to or approximately equal to the price you see on the platform. The same can’t be said for most cryptocurrencies that don’t trade as much as Bitcoin and can hardly be traded at a desired price.

3. In regard to the active “market hours”, the crypto market and its various platforms are usually open 24 hours on each of the 7 days of a week (i.e., 24/7); on the other hand, the forex market operates for 24 hours on only 5 days of a week. This difference can affect the processing time for payments and withdrawals, and influence daily and weekly trends.

4. The crypto market and cryptocurrencies are very volatile; on the other hand, the forex market is more stable. Cryptocurrencies can drastically rise in price within short time frames, but drastic rises in prices are rare in the forex market. It is easier to control risk on forex because it has less volatility or more stability; however, the profit potential is bigger in crypto markets because its volatility can cause a surge in prices and attract huge profits.

5. The crypto market (Bitcoin and other cryptocurrencies) is an offspring of blockchain technology which is not regulated by any central bank or government. On the other hand, the forex market is an offspring of different countries’ central banks whose governments play a massive role in determining the value and future of each fiat currency.

6. The crypto market has a ton (thousands) of cryptocurrencies that can be traded or considered for selection—the crypto market is widely varied! On the other hand, the forex market has only the seven most popular fiat currencies (the euro and other major currencies) which are being actively traded.

7. The forex market is highly regulated; on the other hand, the crypto market is not as regulated as the forex market because the former is mainly decentralized.

8. The crypto market and its platforms are much more prone to security issues, risks, scams, and hacking than the forex market which is regulated and highly supervised to conform to strict rules.


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