If you are considering joining the crypto or forex markets, please explore the article below. We will help you gain the most complete knowledge about these two markets.
What is Forex market?
The Forex market is one of the largest trading markets in the world, with a daily trading volume of about $5,000B. The market consists of financial institutions, businesses, banks, and retail investors, all of which exchange national currencies either as a means to earn a profit.
Forex market came out of the creation of the gold standard in the 19th century as well as the establishment of the United States dollar as the world reserve currency in the 20th century. But until the 1970s, when a rise in institutional and retail investment began to create the kind of system we experience today. Finally, the emergence of the internet has made Forex more approachable and more automated than ever, which has allowed this market to bloom to its current size.
Unlike the stock market, most of the Forex market is OTC. This means that traders negotiate without any governing authorities. Transactions are made between the parties directly or through a middleman who facilitates trades on behalf of clients. The Forex market opens 24 hours a day, Monday through Friday.
Forex is well-known as a fairly volatile market, which is exactly what has attracted traders over the last several decades. This volatility provides opportunities for the trader with making a lot of money.
According to research, this volatility is coming from political and economic news. For this reason, traders pay a lot of attention not only to charts but also to economic reports unfolding on a global.
What is the cryptocurrency market?
Compared to the forex market, the crypto market is still young — about 11 years old — and exclusively transaction with digital assets such as BTC, ETH, XRP,... It opens 24 hours a day, seven days a week.
Cryptocurrency trading started in 2009 with BTC, though it spent a couple of years before the first exchange was opened. And shortly thereafter, with the increase of many different altcoins (ETH, XRP, EOS...), a huge ecosystem of trading digital assets quickly bloomed. Today, this market has a daily volume of $100 billion, with most of that going through exchanges. These trading platforms are open 24/7, however, the regulations of these platforms can fluctuate due to the different rules concerning cryptocurrency in every country in the world.
Cryptocurrency markets are highly volatile and manipulated. Much like the Forex market, the volatility is seen as advantageous. In general, crypto markets are less affected by global events or traditional financial markets. Traders are more likely to be paying attention to technical analysis and charts.
What are the similarities between the two markets?
There are many similarities between these two markets, such as they both trade in currencies, are volatile, and both counts on modern communications technology to operate.
The fact that both markets based on currencies as opposed to other tangible commodities. While not authorities agree to digital assets the title of “currency,” it is this basic kind of tool that Bitcoin and others look for to emulate. Besides, both markets are made up of a variety of traders ranging from individuals to big financial institutions, all of whom are conducting regular business or trying to make a profit on volatility.
One other major parallels between these markets are the way that computers and the internet play a role in the creation of markets.
What are the differences?
Although many parallels, the differences between these markets continue to exist.
OTC trading provides global liquidity, but transactions often must be facilitated by a broker. Traders can get an account that allows direct access to the market, but this requires highly regulated. However, through a broker, the requirements are more straightforward for many investors.
Cryptocurrency is most purchases on crypto exchanges such as Binance, Coinbase. A crypto exchange, as a middleman will take a cut of fee and procedure. Unlike brokers, the exchange acts as the singular authority over trading and usually has a fixed rate. There is no negotiation; it just has the terms and policies. Therefore, this can simplify the process for traders, but it can put traders under the watchful eye of a central authority.
Currencies are not the same as cryptocurrencies. Traditional currencies are regulated by governments and central banks. The value of fiat will be dependent on many things as an economic or domestic product report.
Cryptocurrencies, however, are not tied to a particular nation or bank. Most of them are not pegged to assets, and they count on a speculative faith to derive value. The usefulness of a digital asset (crypto) can vary wildly, and the market is competitive. Meanwhile, No one can be sure of how the legislation will play out.
Which one is best for you?
This is a question that you have to ask yourself. Forex trading can provide more stability and be an industry with deeper roots, more infrastructure as well as clear regulation. However, the room for upside in the Forex market may not be as high as Crypto can offer.
The cryptocurrency market has the risks are greater, but there is potential for massive returns. If it sounds better, then starting to enter the market with a larger and reputable exchange is your best first step. You can pick one of the best exchanges such as Coinbase, Binance, and Houbi.
With this guide, We hope you have enough basic knowledge to prepare to take your first steps onto financial paths. Follow our official channels for up-to-date information:
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Learn more: How to build a cryptocurrency exchange software
