It’s clear that cryptocurrency has taken the investment world by storm in recent years. Chamath Palihapitiya, CEO of Social Capital and former Facebook executive, has even gone on record to say that Bitcoin has effectively replaced gold in terms of market value.
While that statement may seem a little premature, crypto and Bitcoin in particular is a force to be reckoned with. It’s certainly an attractive option for investors who are looking for secure and quick gains.
But does crypto really stand up against other, more established investment options? We’ll try to figure that out below in this comparison between crypto and forex.
The first thing you should know when comparing crypto and forex is that you’ll be dealing with very different risk profiles. As NDTV explains, cryptocurrency is an emerging market, which makes it particularly vulnerable to huge spikes and drops in value. It’s also a speculative market, so volatility is even more likely.
In addition to all that, cryptocurrencies are usually fully digital assets, with no commodity backing. Compare this with forex, which is the trade in fiat currencies. Fiat currencies are used as legal tender and come with government backing, which makes it easier to settle on a value compared with cryptocurrencies.
One similarity between both forex and cryptocurrency investing is that both are relatively short-term investments. Crypto in particular has yet to prove itself as a long-term investment vehicle, despite the favorable returns that many investors have seen over the last decade.
Forex is dependent on a lot of moving parts, which makes it especially important that investors pay close attention to trends in the market. Reputable platform FXCM can identify top movers and trade opportunities, which makes it easier for investors to understand developments in forex trading against a larger global context.
Another thing you should look at is market size. The forex market is the largest market in the world, outpacing even the stock market. According to the 2019 Triennial Central Bank Survey, the forex market trades a daily volume of about USD 6.6 trillion per day.
Cryptocurrency, while growing in size, simply doesn’t trade at the volumes that forex does. And due to its speculative nature, investing or trading in high volumes for cryptocurrency can be riskier. Investing in larger markets is seen as safer, so if you’re a more risk-averse investor you may prefer forex over crypto.
The cryptocurrency market is diverse, with thousands of different coins available for investors to choose from. This means that you may need different brokerage accounts or services in order to access all of them. Not all brokerages provide access to the full range of crypto offerings, so depending on your investments you may find yourself flitting from one to the other.
Forex trading, in comparison, is more familiar. In a short guide, Chron outlines the steps that forex investors need to take to withdraw their profits, which simply involve withdrawal forms and funds wiring. You can also opt to withdraw funds through an ACH transfer from your forex broker to your bank account.
On the whole, cryptocurrency is an exciting market that’s quickly proving its potential. In terms of traditional investment elements, however, it still has a ways to go in terms of establishing itself. If you’re more risk-averse, you may prefer to invest in forex over crypto.
However, that doesn’t mean that cryptocurrency doesn’t also have its advantages — it’s clear that there are ways to make huge gains by investing in crypto. It simply depends on the type of investor you are. And if you can’t decide, there’s always the option of doing both.