The rise of Bitcoin began in 2009 and shortly after, its value reached a peak market valuation of more than $2 billion. Nowadays, cryptocurrency trading is slowly marching towards a level of popularity similar to forex trading. The reason behind this increase is a set of unique advantages that comes with trading digital currencies.
The distinctive aspects of Forex and Cryptocurrency Trading
Since forex has been present so much longer than cryptocurrency trading, it is safe to assume that we all know by now what the forex market is. When you travel abroad, you can’t buy tickets to enter into a museum or purchase souvenirs with the good old U.S. dollar – you need to exchange the equivalent value of the U.S. dollars to the local currency at the current exchange rate. The forex market, where the currencies are traded, apart from being the largest and most volatile in the world; it is also one of the most important, as fiat currencies also need to be exchanged in order to conduct foreign trades and businesses. With a trading volume that surpasses $5 trillion per day, one might think that this market is untouchable; however, more and more traders start to prefer cryptocurrency trading.
The two trading processes are mostly similar, the only difference being that forex trading implies a transaction that trades a country's currency against another country's currency, in order to profit from differences in currency values; while cryptocurrency trading implies the same type of transaction, but instead of fiat currencies, digital currencies are used - such as Bitcoin, Etherem, or Ripple.
The factors that drive the value of the currencies are also part of the main distinctive features: the value of a country's physical currency is a reflection of the country's economic and financial health, while the value of bitcoin is determined by the performance of your computer or the broker, in case you opt to trade digital currencies like commodities with an online broker. This is the way that most traders choose, due to the fact that it is easier, faster and it comes with a list of advantages capable of providing you with a professional trading environment. TradeFw.com is a leading cryptocurrency broker and its renewed services are the best and most secure choice for both beginner and professional investors.
Another distinctive feature between the two types of trading that is worth-mentioning is that the forex market is much bigger than the one of the digital currencies. As mentioned above, the trade volume of this market surpasses $5 trillion per day, in contrast with the cryptocurrency market, which as of August 14, 2017 has reached a market capitalization all-time high of $139 billion. The difference is colossal; however, the advantages that bitcoin trading offers are a solid reason why more and more investors keep choosing it.
Pros & Cons of Forex and Cryptocurrency Trading
Both forex and cryptocurrency trading have their pros and cons, so before you decide which one to pick, you might want to consider the knowing the advantages, but also the risks.
Pros of Forex Trading
- The highly liquid nature of this marketis probably the biggest pro of forex trading and the feature that makes it so profitable and appealing to traders.
- Extensive leverage can lead to very high profits. Online forex brokers typically offer 50:1, 100:1 or even 200:1 leverage to clients, depending on the trading volume.
- Diversity is definitely a pro, because it is always good to have more options. In forex you can trade Major, minor and exotic pairs.
- Stability can come in very handy at times, especially for traders that want to gain quick profits. The foreign currency exchange rates are mainly stable.
Cons of Forex Trading
- High liquidity is just as much of a risk as it is an advantage. It can either bring you a memorable profit or a painful lesson.
- High costs can be a con sometimes; as fees and the bid/ask spread might be a bit too much.
- Getting scammed is one of the major cons, as well. The number of online forex brokers increased with the popularity of this type of trading – which made it very easy for shady firms to operate without a license.
Pros of Bitcoin Trading
- Volatility is a pro and a profitable feature. The daily trading ranges and spikes in volatility offer investors great trading opportunities.
- The possibility to trade anytime is an advantage that makes investors lean towards bitcoin trading. With an online cryptocurrency broker and some money to invest – anyone can trade bitcoin, anytime and anywhere in the world.
- The low costs of transactions and the overall fees are a pro and an advantage worth-mentioning, especially for investors who are just getting started.
Cons of Bitcoin Trading
- Limited leverage might be a big con for many investors. There is no standard for Bitcoin margin trading, as each broker or exchange offers clients their own leverage options.
- Hacking is a very problematic aspect of bitcoin trading and can lead to substantial damages.
- The fact that it is a decentralized market, there isn’t a high-power authority to supervise all the transactions. Although all bitcoin traders comply with a mutually-agreed set of rules, unpleasant situations such as stealing and hacking can occur.
When it comes to their distinctive features, forex trading and cryptocurrency trading are not even close. Forex has been in the game much longer, it has a rich history and a certain reputation. However, bitcoin is the hero of the modern trading era and has become the first choice of many investors, as it can be extremely profitable. In spite of all theories, myths, and success stories - the final choice is all yours!