Both cryptocurrency and forex trading involve exchanging currencies, but that's about where the similarities end. Both of these markets are influenced by different factors.
There's no doubt that trading either of these currencies is effort-intensive; you must be well versed in the art of strategic risk-management, plan very meticulously and leave yourself open to learning every day. On the other hand, though, trading in these currencies will open up the doors of remarkable returns to you, if you invest smartly.
So, if you're an investor wondering which is the better of these two markets, here are essential features of each, to help you decide:
What They Have In Common
One thing that both cryptocurrency and forex have in common is, both markets can be highly volatile. However, the cryptocurrency market is more volatile. The volatility index of Bitcoin alone is pegged around 5% to 15%, compared to around 1% for extreme currencies in Forex and about 5% for most of the popular currencies.
This high level of volatility is both a blessing and a curse. On one hand, the higher risk involved may bring about greater reward. Conversely, though, the wildly fluctuating prices may lead to huge losses.
Other Features Of Crypto And Forex
This section talks about supply and global events.
The Forex market is basically a concentration of the world's global financial markets, therefore, there are no restrictions on currencies available to trade. In other words, there is an unlimited supply of currencies in the Forex market.
On the other hand, cryptocurrencies face restrictions on the number that can be created, leading to increased demand and higher value.
- Global Events
Both markets, like conventional markets, are influenced by global news, trends, earnings reports, announcements and other factors that affect the market. The Forex market is more profoundly affected by these events.
Traders can use this to their advantage by planning for these events and tailoring their strategies to these events ahead of time.