We’ve seen debates about forex vs crypto everywhere. Forex trading, in the global financial market, is very popular and attracts people from various backgrounds.
On the other hand, crypto trading has also gained significant attention in recent years. Both have their strengths and weaknesses.
In this article, let’s simplify the key points to assist you in deciding which one is better for you between cryptocurrency and foreign exchange trading.
What is Forex?
Forex stands for foreign exchange market, or in simpler terms, it’s about trading different world currencies. It allows anyone to access international currency trading.
In a nutshell, it’s like buying and selling currencies, such as converting your local currency (like the Dollar) into foreign currencies like the Euro or Yen.
When you trade in foreign exchange, you’re basically buying and selling currencies, just like you would with any other product, but here, the currency is the main item you’re dealing with, and its price is set and agreed upon beforehand.
Think of it like buying something from an international vendor at a different price than a local one – that’s part of forex trading.
What is Crypto?
Crypto is an innovation that creates digital tokens using blockchain technology. Cryptocurrency acts as a digital currency where every transaction is verified and recorded on a decentralized system, not controlled by a single authority.
In simple terms, it’s a digital currency that can be used and sent anywhere. All cryptocurrency transactions are stored on the blockchain network to enhance security and transparency.
This minimizes various risks and eliminates the need for intermediaries, which would add extra costs and time.
Differences Between Forex and Crypto Trading
While both are similar in relying on supply and demand, they have significant differences. Let’s break down the differences between forex and crypto trading:
1. Volatility and Risk
Both markets are generally unstable, but crypto tends to be more volatile than forex. This means cryptocurrency prices can change rapidly due to small global market movements, leading to significant fluctuations in just days or even hours.
On the other hand, crypto trading has higher daily volume but with less frequent and less volatile movements, making it more attractive to conservative traders.
2. Trading Hours
The last difference between forex vs crypto trading is the hours. The foreign exchange market operates 24 hours a day, five days a week, with different trading sessions corresponding to major financial centers worldwide.
This allows for continuous trading opportunities. On the other hand, cryptocurrency markets also operate 24/7, offering round-the-clock trading. This constant availability is appealing to traders who prefer flexibility in their trading hours.
3. Security Structure and Regulation
Both markets rely on supply and demand, allowing traders to negotiate and set prices without the need for centralized approval, such as from the government.
Crypto and forex can be traded over-the-counter (OTC) or through exchanges or brokers, with slight differences in their structures.
Both are decentralized, meaning they aren’t controlled by a central authority, like a government. Some people consider this transparency a key advantage, especially in crypto trading.
4. Trading Volume
Forex has a much larger trading volume than crypto, as it involves transactions from various entities, including corporations, investors, banks, and individuals. It operates in real-time, exchanging foreign currencies.
On the other hand, while the crypto market has grown significantly, it is still smaller compared to foreign exchange. However, in 2021, crypto trading volume exceeded USD 1.5 trillion and is predicted to surpass USD 2 trillion by 2030.
Forex vs Crypto: Which Option Is Less Risky and More Profitable?
It’s essential to know that cryptocurrency or foreign exchange trading comes with risks, advantages, and disadvantages. Keep in mind that forex and crypto markets are not regulated by the same authorities.
Forex trading involves OTC mechanisms, involving various market players such as banks and investment funds, and it’s more tightly regulated than crypto.
On the other hand, most cryptocurrencies are currently unregulated and traded on decentralized public markets without financial authority supervision. This makes forex trading more secure in terms of regulation.
Both can be profitable, but cryptocurrency may offer higher returns along with higher risks compared to foreign exchange trading.
In summary, forex is a global market where one currency is converted into another in real time, providing exposure to international currency trading.
Crypto is an innovation offering a mechanism for a digital currency that records and verifies every transaction on a decentralized system without going through central authorities like brokers or banks.
Both markets are volatile, but crypto tends to be more unstable. The regulations also differ between foreign exchange and cryptocurrency. Make your decision carefully, considering your risk tolerance and investment goals.
Personal Note From MEXC Team
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