Switching from Forex to Crypto – What You Need to Know
Forex and Crypto may seem similar at first glance, but there are several fundamental differences between the two, which are discussed in this post.
If you are adding cryptocurrencies to your investment portfolio, you must be aware of how lucrative the blockchain sector is. The fact that these decentralised currencies remain unaffected by governments and economies is an attractive feature of this asset class. Unlike forex, cryptos aren’t moved by traditional factors, such as geopolitical tensions, inflation rates and monetary policies of central banks. Therefore, the virtual asset class becomes a safe hedge against forex trades, a haven in case of country-specific economic crisis.
But, both markets have some similarities and differences that you should know about.
Crypto Markets Are Highly Volatile
Unlike forex volatility, which is around 1% for extreme currency pairs, the crypto markets are highly volatile. Prices tend to fluctuate by huge margins, sometimes even in a single day. But it is not as though the crypto markets are meant for high-risk traders only. With frequent price hikes and lows come opportunities to enter and exit markets, several times a day. Day traders, scalpers and position traders can hugely benefit from such trends. MT4’s crypto-specific indicators can help in determining entry and exit points, to enable trading with minimal risk.
Large Number of Trading Pairs
Just like the forex markets, cryptocurrencies are also available in a large number of trading pairs. There are over 1,916 cryptocurrencies in the market, with the top-five (by market capitalization) being Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), Bitcoin Cash (BCH) and EOS.
Blackwell Global provides over 15 different crypto pairs for trading CFDs at 50% margin. You will also find a vast educational resource there to help you gain more familiarity with the crypto markets and make informed trading decisions.
Cryptocurrency Markets are Open 24/7
Cryptocurrency markets remain open all through the week, 24 hours a day. In contrast, the forex markets are closed during the weekends. Trading volumes, however, fluctuate depending on the time of the day. Different countries enter the market at different times, too.
Cryptos Prices are Governed by Different Factors
Although monetary inflation rates don’t affect cryptos, they have their own price inflation factors. These factors differ from the traditional macroeconomic tendencies seen in forex fluctuations.
- Cryptos are community driven: Any rumor or news release related to cryptos or blockchain affects the opinions of people in the community. Scandals and thefts can bring down coin prices.
- Demand and supply ratio: Alt coins are mostly limited in supply, so the rate at which they are mined has an impact on prices. For example, Bitcoin’s total supply has been limited to 21 million, of which approximately 17 million coins have already been mined. Mining has deliberately been made greater than the demand.
- Immune to monetary inflation: Once all the coins have been mined, no more can be found, which makes them immune to debasement and monetary inflation. This is quite unlike forex, where governments can print more money at any time.
- Mainstream adoption affects the price of cryptos: In general, the greater the adoption rate, the more positive the public opinion, which will drive up prices.
If you are worried about the safety of crypto exchanges, the best option is to trade crypto-CFDs. CFDs will give you the flexibility of taking positions in both rising and falling markets, without needing to own the underlying asset. With these, there is no need to store the asset and therefore no threat of losses due to hacking.
To start trading crypto CFDs, go to Blackwell Global today.
The publication does not endorse any trading products and this article is not investment advice. Trading-leveraged products involve a high level of risk. 71% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.