Which is Better: Crypto Trading or Forex?
Deciding on which is better between crypto and Forex depends mostly on your financial goals, trading style strategy, and risk tolerance. In fact, you can try both at the same time to see what works best for you specifically. The pros and cons of both assets discussed in this article will help you make a more reasoned choice:
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Forex Pros: Stable market, Established regulations, Professional advisors.
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Forex Cons: Comparatively small selection of markets, Higher Costs, Overleveraging risks, Limited transparency.
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Crypto Pros: Potentially high profitability, Large asset selection, Innovative technology.
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Crypto Cons: Regulatory uncertainty, Security risks, Market volatility.
In the energetic landscape of financial markets, traders are spoilt for choice when it comes to choosing an asset class to invest their capital in, each boasting the promise of lucrative returns. Two financial markets that continue to draw in millions of traders and billions of dollars from all over the world are Forex and cryptocurrencies. Forex, or foreign exchange trading, involves the buying and selling of currencies, with traders aiming to profit from fluctuations in exchange rates. On the other hand, crypto trading involves the buying and selling of digital currencies like Bitcoin and Ethereum, operating on blockchain technology.
People are drawn to crypto for its decentralized nature, potential for high returns, and innovative technology. In contrast, Forex attracts traders due to its liquidity, stability, and established market infrastructure. In this article, we'll explore the differences and similarities between these two markets, looking at the pros and cons of each, to empower you to make informed decisions that line up with your financial aspirations.
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Is Bitcoin more profitable than Forex?
On a longer timescale, over the past decade Bitcoin would have been more profitable. Forex on the other hand, is more skill-based and can provide a more stable stream of profit, rather than large and sudden regular gains, as is often the case with crypto.
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Is Forex more risky than crypto?
Crypto is generally considered to be the riskiest financial market as volatility can be extremely high, and a lot of price behavior is based on speculation and market sentiment, rather than fundamental analysis. Forex is still high risk, but not as much as crypto.
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Is Bitcoin part of Forex trading?
Bitcoin is part of the cryptocurrency market not Forex, though Bitcoin can be used to trade Forex currency pairs, and Bitcoin CFDs can be purchased through Forex.
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What is more profitable than Forex trading?
This ultimately depends on how you are trading, which individual assets you trade, and how experienced you are as a trader. However, if you were a long-term investor and put $1000 into Forex, stocks, gold, and crypto one year ago, Forex would have provided the lowest returns.
Forex vs Crypto: Which is better to trade and invest In?
Trying to establish which is the better choice between crypto or Forex is like trying to tell someone whether apples or oranges are better – they both serve the same basic function, but ultimately it comes down to individual preference. Both crypto and Forex provide opportunities to make money but are highly volatile and risky, operate 24 hours a day (not weekends for Forex), and involve a lot of speculation and technical analysis. However, the two differ in market maturity, fundamental factors, regulations, and liquidity. Let’s look at each one a bit more closely.
What are the similarities between crypto and Forex?
There are several surface-level similarities between the two:
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Accessibility: Both can be traded on online platforms by traders from (almost) anywhere in the world. Forex can be traded 24 hours Sunday to Friday, while crypto markets run 24/7.
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High Volatility: Both markets can experience significant price fluctuations within short time frames, offering profit opportunities but also adding risk. However, crypto is considered the most volatile financial market of all, with large and sudden price movements. Forex, though highly volatile, is comparably stable.
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Speculative Trading: Traders in both markets often engage in speculative trading, aiming to profit from price movements rather than buying based on intrinsic value (such as with stocks).
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Technical Analysis: Traders in both markets rely heavily on technical analysis of chart patterns to recognize trends and trade opportunities.
What is the difference between Forex and crypto?
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Trading Platforms: Crypto transactions typically occur on online exchanges, whereas Forex trades are often conducted through over-the-counter (OTC) platforms. In fact, Forex is the most popular OTC market.
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Costs of Intermediaries: Forex trading often involves intermediaries, leading to higher transaction costs, unlike cryptocurrency trades that usually occur directly between buyers and sellers on exchanges, with much lower fees.
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Liquidity: Forex markets tend to exhibit higher liquidity due to their larger trading volumes, minimizing the impact of large trades on prices.
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External Factors: Forex prices are largely influenced by economic indicators, political events, and global news, whereas cryptocurrency prices may be influenced by similar factors but mostly by technological developments and market sentiment. Crypto relies a lot more on positive sentiment and public perception.
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Regulation: Cryptocurrency trading faces varying degrees of regulation globally though is mostly completely unregulated because it's so new, and only recently started to gain the attention of governments and financial authorities. Forex trading operates under close scrutiny within a much more established regulatory framework.
Best Forex brokers to trade crypto
Is it better to trade Forex?
Whether Forex is better than crypto is essentially determined by your financial goals, risk tolerance, and trading strategy and style. Forex is a large global market that can be traded 24 hours a day Sunday to Friday, with high liquidity. There are dozens of currency pairs to choose from so you can opt for those from major economies you understand well or are tied to stock markets you already trade in. However, Forex does come with a lot of risk, and as much as 95% of Forex traders actually lose money. You can read more about that in our article: What is the Dark Side of Forex Trading?
To help you narrow down your decision, let’s look at the advantages and disadvantages of Forex trading, only focusing on those that don’t apply to crypto.
👍 Advantages Explained:
• Stable Market: Forex markets are relatively mature and so tend to be more stable compared to the highly volatile cryptocurrency markets, making them potentially less risky for some traders.
• Established Regulatory Framework: Forex trading operates within a well-established regulatory framework in most jurisdictions, providing you with greater legal protection and recourse if there are any disputes.
• Predictability: Forex prices are primarily influenced by economic indicators, geopolitical events, and central bank policies, making it easier (than crypto) to predict price movements.
• Access to Professional Analysis: Forex markets are extensively covered by financial institutions, analysts, and research firms, providing access to professional analysis, market insights, and trading strategies. Though crypto has many analysts, Forex has a lot more fundamental analysis to back it up, and a more established economic history to draw on.
👎 Disadvantages Explained:
• Hours: Though Forex can be traded 24 hours Sunday to Friday, it has fewer trading hours than crypto, and availability is based on the opening hours of which exchange the currency pair is on, for example, AUD pairings during Sydney Exchange hours.
• Higher Costs: Forex trading often involves higher transaction costs, including spreads, commissions, and overnight financing fees, which eat into profits more significantly than with crypto.
• Overleveraging Risks: Forex trading offers high leverage ratios, which can amplify both potential gains and losses. However, excessive leverage can lead to margin calls and substantial losses, especially if you’re an inexperienced trader.
• Limited Transparency: Forex markets may lack transparency compared to centralized cryptocurrency exchanges, making it difficult to assess market depth, order book data, and execution quality.
Before you make a final decision, let’s look at whether cryptocurrencies might take your fancy instead.
Is trading crypto a good idea?
Crypto is a young and exciting market with so much opportunity for growth that it has minted an estimated 88,200 “crypto millionaires” according to data from a Henley & Partners report. Yet, crypto is not for everyone. And if you’re only learning about crypto now, you may have missed the boat. Many financial analysts disagree with that, however, and assert that the crypto boom is only just beginning. With a total market cap of $2.83 trillion – a number that has grown exponentially in recent years – it certainly looks like crypto could keep growing. That number pales in comparison to the average daily Forex trading volume though, with a whopping $7.5 trillion traded per day!
To help you decide if crypto’s right for you though, let’s look at its advantages and disadvantages over Forex.
👍 Advantages Explained:
• Decentralization: Cryptocurrency trading occurs on decentralized blockchain networks, which removes the need for intermediaries, resulting in faster transactions and reduced costs.
• Potential for Higher Returns: Cryptocurrency markets have historically exhibited higher volatility and potential for significant price appreciation compared to Forex. Crypto’s long-term growth in the past decade far exceeds that of Forex markets.
• Diversification: Crypto trading allows you to diversify your portfolio and invest in a huge selection of assets, with 13,217 cryptocurrencies in existence as of March 2024.
• Innovative Technology: Cryptocurrency trading operates on innovative blockchain technology, which provides transparency, immutability, and security features not available in Forex.
👎 Disadvantages Explained:
• Regulatory Uncertainty: Cryptocurrency trading operates in a regulatory gray area in many jurisdictions, with evolving and often unclear regulations, leading to uncertainty, legal risks, and potential regulatory crackdowns or restrictions. However, this looks set to change with the growing acceptance of cryptocurrencies.
• Security Risks: Crypto trading platforms and wallets are susceptible to hacking, fraud, and theft due to the irreversible nature of blockchain transactions and lack of centralized oversight, adding increased risk.
• Market Volatility: Cryptocurrency markets are the most volatile of all financial markets, with prices subject to rapid and unpredictable fluctuations driven by market sentiment, news events, and speculative trading.
The most well-known and established cryptocurrency is Bitcoin, the first ever and the most valuable one in existence. Since it’s been around for so long and seen tremendous growth, many wonder if it’s still worth investing in. Let Traders Union help you decide whether that’s true: Is Bitcoin (BTC) a Good Investment in 2024?
Use cases for Forex
Trading Forex involves buying one currency while simultaneously selling another currency (currency pairs) to profit from exchange rate changes. Traders analyze fundamental and technical factors and attempt to forecast currency movements, then execute trades. Traders are drawn to Forex because it offers flexibility, allowing them to go long (buy) or short (sell) currency pairs based on their market outlook. Successful Forex trading requires discipline, risk management, and a strong understanding of the foreign exchange market, as well as a grasp of international trade, geopolitics, and economics.
Forex trading and investing has several uses. It can be used:
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as a hedge against currency risk associated with international transactions and investments;
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to profit from fluctuations in exchange rates;
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and to speculate on currency price movements due to events in international trade.
The Forex market is the largest financial market in the world, and the most active, making it incredibly liquid and offering ample trading opportunities with tight bid-ask spreads. It can be accessed 24 hours a day from Sunday to Friday and is often associated with high leverage. This high accessibility and increased opportunity for profit are huge draws for traders, particularly day traders and swing traders.
Use cases for crypto
Trading cryptocurrency involves buying and selling digital currencies like Bitcoin, Ethereum, and altcoins on cryptocurrency exchanges. Traders analyze price charts, market trends, and news events to make trading decisions, though much of it is purely speculative.
Fundamental analysis in crypto is not common. Trading crypto requires technical proficiency, strong risk management skills, and an understanding of market dynamics to navigate the volatile cryptocurrency markets successfully. It can provide huge opportunities for profits (percentage increases go into the thousands in the short term) but has perhaps the highest levels of risk.
Crypto is often seen as a long-term investment with prospects of huge growth over time. If you’d invested just $10 in Bitcoin when it first emerged (2009), you’d now be a multi-millionaire.
All-time Bitcoin Price chart
Crypto has seen its ups, with all-time highs first in 2021 and then again in 2024, but with a long downturn dubbed the ‘crypto winter’ in 2022-2023. Depending on when you bought crypto, you would have most likely seen massive gains. Now, as crypto makes massive gains, thanks in part to the approval of a Bitcoin Spot ETF by the SEC, capital is pouring into the crypto market. The question on everybody’s minds though, is, how long until the boom reverses and crypto plummets again?
Traders are drawn to crypto for its long-term growth opportunities and accessibility. It can be traded 24/7 and using small amounts of starting capital. It operates on a decentralized blockchain, offering transparency, but with little to no regulation. The lack of regulation can be a draw for some, but off-putting for others. Little regulation can mean a lack of security.
Can you trade crypto on Forex?
If you’re still not decided between the two, why not combine crypto and Forex trading? Today, many Forex brokers offer the ability to trade on currency pairs using crypto as funding. Additionally, you can trade crypto CFDs, which allow you to speculate on the future price movements of cryptocurrencies. Traditional Forex CFDs let you open contracts on the future performance of the US dollar or British pound. Now, Forex crypto CFDs let you do the same with digital currencies like Bitcoin or Ethereum. You can find out more about how to trade crypto CFDs here: Best Brokers For Crypto CFD Trading
According to Mirjan Hipolito, one of TU's experts: Сrypto and Forex are not mutually exclusive. You can try both (even at the same time) to see what works best for you. For example, you can manually trade "hot" crypto coins while setting up a trading bot for automated Forex trading.
Conclusion
Ultimately, the choice between Forex and cryptocurrencies hinges on your individual preferences, risk appetite, and trading strategies. Forex provides more opportunities for accurate predictions based on fundamental data, and is ideal for day trading and swing trading. Cryptocurrencies on the other hand, require more technical analysis and may be better suited for long term investment.
You could explore combining both markets or delve into one based on your financial goals and risk tolerance, aiming to capitalize on opportunities while mitigating risks inherent in each market. Whether opting for Forex or cryptocurrencies, we advise you to conduct thorough research, employ sound risk management practices, and stay informed about market developments to make informed trading decisions aligned with your objectives.
Team that worked on the article
Jason Law is a freelance writer and journalist and a Traders Union website contributor. While his main areas of expertise are currently finance and investing, he’s also a generalist writer covering news, current events, and travel.
Jason’s experience includes being an editor for South24 News and writing for the Vietnam Times newspaper. He is also an avid investor and an active stock and cryptocurrency trader with several years of experience.
Dr. BJ Johnson is a PhD in English Language and an editor with over 15 years of experience. He earned his degree in English Language in the U.S and the UK. In 2020, Dr. Johnson joined the Traders Union team. Since then, he has created over 100 exclusive articles and edited over 300 articles of other authors.
The topics he covers include trading signals, cryptocurrencies, Forex brokers, stock brokers, expert advisors, binary options. He has also worked on the ratings of brokers and many other materials.
Dr. BJ Johnson’s motto: It always seems impossible until it’s done. You can do it.
Mirjan Hipolito is a journalist and news editor at Traders Union. She is an expert crypto writer with five years of experience in the financial markets. Her specialties are daily market news, price predictions, and Initial Coin Offerings (ICO). Mirjan is a cryptocurrency and stock trader. This deep understanding of the finance sector allows her to create informative and engaging content that helps readers easily navigate the complexities of the crypto world.