According to the BBC, about one in 20 people who are looking for a job find it hard to land one, especially as the country is still slowly recovering from the devastating effects of a global health crisis. For this reason, more people have started turning to alternative and unconventional ways to make money. Specifically, some are finding a financial boost through trading forex and cryptocurrency. Not only do they have the potential to bring you massive financial gains, but it’s also a great way to rake in some extra income even on top of a full-time job.
While many argue that it’s unfair to compare cryptocurrency trading with forex trading as they operate with different rules and markets, it is vital to note the difference between the two — especially if you’re trying to figure out what market best fits your goals and current socioeconomic status. Here, we’ll discuss the difference between crypto trading and forex trading to help you determine where you should invest your hard-earned cash.
Why choose crypto trading?
Cryptocurrencies are currently booming, and many investors are scrambling to get a slice of the pie. True enough, a report by The Economic Times notes that cryptocurrencies such as bitcoin, ethereum, ripple, and dogecoin have been performing exceptionally well despite the pandemic. The crypto market is currently experiencing its longest bull run to date, and this has made this particular financial market irresistible to investors who want quick returns.
One reason why many choose to trade cryptocurrencies is because, even with low fees and low barriers to entry, the potential for growth is considerably high. What’s more, the cryptocurrency market is open 24 hours a day, seven days a week, and you can trade cryptocurrencies using most online brokerages. However, it is crucial to remember that storing crypto on online brokerages is not the most secure way to keep it. So if you don’t plan on trading the crypto you’ve bought immediately, be sure to pull it out and store it in a secure and offline crypto wallet.
Before choosing crypto, you should also do your research first and recognize that the crypto market operates on different rules compared to the forex market. For example, the capitalization of cryptocurrencies is smaller than fiat currencies and this makes them more sensitive to micro issues such as integrity, popularity, and adaptability. Moreover, the cryptocurrency market is far more volatile than the forex market. While this allows you to reap surprisingly high returns, it also increases your chances of experiencing huge losses.
Why choose forex trading?
Investors that don’t like the slow pace of other securities often pivot to forex trading. Forex trading, also known as foreign exchange and currency trading, is a decentralized global market where you can buy and sell currency. According to FXCM, the forex market is the largest among all the financial markets, with a daily trading volume that exceeds $5 trillion. This means that there is high liquidity in the forex market and traders can easily get in and out of trades, even in large sizes.
Compared to cryptocurrencies, forex as an asset class has low volatility, since fiat currencies are managed by central banks. Because of this, the forex market is relatively stable and investors don’t need to worry too much about fraud and theft — thanks to the centralized protection. Plus, forex traders can trade 24 hours a day, five days a week, allowing them to be in full control over their working hours.
However, it is important to note that forex trading has its fair share of pitfalls. For one, the constant regulation of the forex market by financial institutions makes it hard to experience huge, short-term gains. In addition, you are subjected to high fees and middleman costs, particularly if you fail to choose a reliable and fair forex broker. Lastly, forex markets are easily influenced by global and political events, so if you’re not quick enough to pull out your investments, you may experience major losses.
Which should you invest in?
The crypto and forex markets share similar characteristics. But, always remember that their risk-reward dynamic largely differs. Before settling on a financial market to invest in, be sure to think it through carefully to mitigate your risk and increase your chances of experiencing huge returns. For more cryptocurrency insights and news, check out our other posts here on Crypto Invest.
