Have you been trading in the traditional forex markets and are planning to try your hand at Cryptocurrency trading? Are you wondering what the differences are between the two markets? Worry not. Artur Hochberg has outlined the differences between the two assets and their trading methods below.
Differences between crypto and FX trading
First, the forex market also referred to as FX and crypto trading, are two separate markets. The forex market is known as the world’s largest and most liquid market. The asset of choice in FX trading are currencies of different countries.
The FX market asset prices are influenced by factors such as political and economic changes and their announcements. Job reports and inflation figures also play a big part in the determination of the value of a currency on trade. At least $5.3 trillion is traded in this market every day.
Digital currencies, on the other hand, are decentralized currencies hosted online. The technology that builds and runs them is called blockchain. These currencies can change hands without the need of central banks or any other intermediary across the world.
Their values are also not prone to manipulation by central banks and their governments. Cryptocurrencies are not owned by any country but instead run on a peer to a peer authentication process. This process is the check and balances measure that prevents fraudulent activity during trading.
Both processes nonetheless involve the exchange of one type of currency for the other. The main differences, therefore, lie in the factors that influence the values of the assets. While the FX market is volatile, Artur Hochberg advises that the crypto market is far more unstable.
The forex market, for instance, has a volatility of 1% to 5% for foreign currency pairs. Bitcoin, however, has volatility levels of 5% to 15%. This means that crypto trading can bring in significant returns and losses as well. Indeed, cryptocurrencies trading is desirable to any trader who has a high-risk tolerance.
Essential features of FX and crypto trading by Artur Hochberg
- The forex market has an unlimited supply of currencies from countries around the globe to trade-in. A look at Artur Hochberg (com) will introduce you to some of the most popular currency trading pairs. The crypto market, on the other hand, is still developing. The supply of digital trading pairs is finite. There is also a cap on the quantities of tokens created, which enhances their value.
- Most FX trading platforms will allow trading leverage of 50:1. This feature can increase your profits or multiply your losses. Crypto trading also enjoys leverage which gives it’s the same effect as FX trading when it comes to profit or loss-making. Crypto trading nonetheless has fewer and lower transaction fees, due to a lack of third party players in its payments design.
- The FX market enjoys deep liquidity due to its high demand and participants. Cryptocurrency trading has a more substantial potential for gain. Bitcoin, for instance, has risen from a value of $1,000 in 2013 to over $10,000 in 2019.
Trading FX or crypto requires a high level of vigilance and engagement. You need to keep atop happenings in both markets and do a thorough risk assessment to succeed. Add to that perseverance and a desire to keep learning, and you will be on your way to the top.