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How Does Crypto Investment Differ From Forex?

Foreign exchange is the biggest financial market in the world, seeing a daily turnover of roughly $6.6 trillion. Meanwhile, the cryptocurrency market is expected to hit about $4.94 billion in daily trading activity by 2030. This substantial difference in volume is explained largely by the respective ages of the two markets. Forex has been around since the 1970s (and long before then if you consider other forms of currency trade historically), while the crypto market is still very much in its nascent stage. Bitcoin only took off in 2010.

Volume and age make for some of the clearest differences between forex and crypto. For investors interested in exploring these markets though, there are other distinctions that are also worth taking note of. In this post, we’ll highlight four specific ways in which forex and cryptocurrency differ from one another.

Market Volatility

In the crypto space, the biggest reservation shared by expert and beginner investors alike concerns volatility. Periodically, we’ve seen Bitcoin spike to all-time highs only to decline in the subsequent months.

Just recently, Bitcoin surpassed $66,000 in value and recorded its all-time high after a sharp decline in April. Unfortunately, as NDTV explained in detail earlier this year, these highs and lows are common in speculative assets and emerging markets. This is true in general, and the nature of cryptocurrency likely doesn’t help matters. It’s digital, intangible, and difficult to control or regulate. Indeed, India only recently announced crypto policies to help regulate the market and prevent the misuse of crypto in the country. All of these factors can further contribute to volatility.

On the other hand, fiat currencies are much less volatile. That’s not to say they don’t see their values fluctuating constantly. But it’s happening in much smaller increments, mainly due to high liquidity and constant trading. Now, there are some things that can lead to larger fluctuations in price, such as major socio-political or economic events. For instance, many East Asian currencies suffered a decline of as much as 38% during the Asian Financial Crisis of 1997. For the most part, though, volatility is less of a problem in forex than it can be in cryptocurrency.


Trading time and accessibility

There’s a perception that cryptocurrency markets are almost unusually accessible. By nature, all trading has to occur online, and the vast majority of it is done through easy-to-use exchanges, either in browser windows or on mobile apps. There’s no arguing that from a practical standpoint it’s quite easy to make crypto trades once you have an account set up.

With all of that said, however, crypto is not alone in offering this degree of convenience, and forex has come a long way over the years. According to an introduction to forex by FXCM, you now only need an internet connection and an account at an online trading platform of your choice to buy and sell currency at whatever pace you like. Furthermore, currency exchanges stay open 24 a day during the workweek, making the market far more accessible than most.

Of course, cryptocurrency can be bought and sold 24/7, so perhaps there’s still a slight edge to digital currency. But the reality is that both markets are quite accessible.

Liquidity of the Asset

Liquidity speaks to how easy it is to buy and sell assets for cash. For instance, real estate is looked at as one of the least liquid common investment assets due to the length of time it takes to move properties.

As the most heavily traded market on Earth, forex is essentially the most liquid asset by definition. That means trading happens quickly and smoothly. Cryptocurrencies’ liquidity is still moderate by comparison, but this is gradually changing as more people enter the market. The growth of crypto exchange user bases brings greater liquidity by the day –– though at this point the edge in this category still goes to forex.

Asset Diversity

One of the most appealing aspects of the crypto market, as it continues to expand, is that it consists of so many assets. Conditions for trading Bitcoin aren’t always ideal due to its tremendous price point, but the presence of alternatives to Bitcoin like Ethereum, Binance Coin, and more still give traders opportunities to get in on crypto.

Similarly, you have a wide range of options in currency trading. While some of the most commonly traded currency pairs are EUR/USD, USD/JPY, and GBP/USD, the truth is that there are pairings for most major currencies around the world. Whatever appeals to you as a financially strategic trade is usually available. That said, even the variety of the currency trade can’t quite match the sheer number of cryptocurrencies available on exchanges these days.


As you can see, there are still some notable similarities between crypto and forex markets. But we hope the points above have conveyed that they are ultimately two very distinct trading environments, and should be approached accordingly.

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Written by: Jessie Breene