Do You Know the Difference Between Forex and Bitcoin?Kehinde LAWAL
Forex and Bitcoin can be traded in the same manner with roughly identical strategies and indicators. Nevertheless, it’s a mistake to think that the foreign exchange market and the cryptocurrency market are indistinguishable. There are striking differences between the two, which is why it’s important to understand the phenomenon.
Forex, commonly referred to as the foreign exchange market is an international market for the trading of currencies. One currency is changed into another currency for multiple reasons. Examples include but aren’t limited to trading, commerce, and tourism. In the FX market, traders try to make a profit by buying and selling currencies by actively pouring money into the market, speculating on the path that the currencies will take in future time.
With Bitcoin, it’s a completely different story. Bitcoin is a form of electronic money that is utilized to pay for goods, services, and so on. It’s just as valuable as traditional currency. A cryptocurrency exchange involves the trading of digital currencies for other assets. These assets can be anything from physical money to other types of electronic money. The very first Bitcoin exchange was established in October 2009.
So, Is There Any Difference Between Forex and Bitcoin?
To answer the question, there isn’t just one difference between the two. The truth is that Forex and Bitcoin differ in so many ways that it’s hard to believe they are part of a common heritage. It’s important to familiarize yourself with the basics before taking up trading. This is pretty much what you need to know.
Forex Is Highly Liquid, Whereas Bitcoin Is Less Liquid At The Moment
If you were to analyze liquidity factors, you’d soon understand that the foreign exchange market and the cryptocurrency market are contrasting. The FX market, as far as it’s concerned, is highly liquid. This is due to the fact that it’s tradable 24 hours a day during the days of the week. Assets can be easily transformed into cash and you don’t risk producing a change in the current market price. Attention needs to be paid to the fact that not all currency pairs are liquid. They have varying levels of liquidity based on whether they are major, minor, or exotic trades.
Now, let’s talk about Bitcoin. In the past, it was hard if not impossible to find people willing to accept your digital currency at any price. At present, various exchanges occur. People are buying and selling BTC at any time. Unfortunately, the cryptocurrency market is less liquid. Why? The explanation lies in the fact that Bitcoin isn’t mainstream as a form of payment. It doesn’t scale in order to be universally accepted. Owing to the decision made by the developers of the main technology, production is limited to a fixed amount. Put simply, individuals can’t buy assets as easily with BTC, which is a problem.
The greater the liquidity, the more stable the market is. In this respect, Forex is the clear winner. More than $5.3 trillion dollars are traded each day in the foreign exchange market. Interestingly, Bitcoin can serve a good means of deposits. You can deposit funds into your FX account via Bitcoin. However, not all Forex brokers accept BTC as a valid form of payment.
Very Few Forex Traders Extract Profit. It’s’ Relatively Easy to Make Money with Bitcoin
Maybe you’re curious to know how much FX traders make in terms of monthly returns. Surprisingly or not, they don’t make a lot of money. Only a small percentage of Forex traders are capable of extracting profit. This is because they’re undercapitalized with regard to the size of the financial transactions they make. Additionally, they can’t control their emotions, therefore, making all sorts of errors.
Nonetheless, it shouldn’t be understood that trading currency pairs aren’t a lucrative undertaking. You can make sustainable profits in Forex trading if you carefully prepare and diversity your limits and risks. Most importantly, it’s necessary to have patience. Don’t become upset if a trade doesn’t have the expected outcome or if it doesn’t make a profit right away.
When it comes to BTC, you have to purchase low and sell high. The best way to earn money is to invest a small amount of money. Buying and selling futures is one thing you can do. Cryptocurrency trading may seem simple enough, but it requires a little bit of knowledge. BTC can give back enormous gains, yet there is the possibility of financial loss.
To be more precise, trading Bitcoin isn’t a child’s play. Not anyone can extract profit, no matter the skills or experience they might have when it comes to trading assets. It’s safe to trade, but finding opportunities requires a great deal of patience.
FX Trades Are Regulated by A Central Authority, But Bitcoin Isn’t Regulated
The foreign exchange market is regulated by the FCA (Financial Conduct Authority) in the United Kingdom, which is responsible for monitoring market transactions. In the United States, the Fed (Federal Reserve) struggles to eliminate manipulation. The goal is to ensure fair and transparent business behaviour. Brokers, as well as investment banks, and signal sellers have to comply with the rules.
What about the cryptocurrency market? Well, it’s not regulated. What’s worse, it’s not viewed as money from a legal standpoint. As far as Bitcoin is concerned, the financial transactions are overseen by the participants in the blockchain network. In the future perhaps, BTC will be regulated just like any other commodity, such as gold. For the time being, though, it’s impossible to regulate it in the legal system. So, there’s no way to get the money back in case it’s lost.
The bottom line is that Forex trading isn’t the same thing as cryptocurrency trading. Comparing Forex and Bitcoin is like comparing apples and oranges. In other words, noting the similarities or dissimilarities between two items that don’t bear comparison. The good news is that you can trade Forex with Bitcoin. So, if you can’t make up your mind, trade both.
This article first appeared on KryptoMoney