Forex and Crypto trading are a lucrative way to make money online just by investing money. However, both are risky in some ways, as forex and crypto markets may not always go in your favor.

Moreover, the value of the whole forex market is approximately $2.4 quadrillion or $2409 trillion. As for cryptocurrency, the global cryptocurrency market is currently at $1.07 trillion. These numbers show how gigantic these two markets are. However, both markets do have differences and different policies.

In this article, we will get you through the differences between both markets so you can make informed decisions before delving into it. Without further ado, let’s dive into it.

What is Forex Trading?

In a nutshell, forex trading is also referred to as foreign exchange trading, where an individual buys and sells foreign currencies with the aim of making profits. However, if you don’t know how to get started in Forex trading, it is indispensable for you to follow the right trading strategies and tricks, and learn about the nitty-gritty details of trading.

Moreover, the currencies that are quoted with each other are called cross or currency pairs. If any currency is paired with the US dollar, it is called a currency pair. However, pairs not having US dollars are called cross pairs.

Pros and Cons of Forex Trading

Pros:

• Offers flexibility to traders to trade from anywhere around the world.
• Lucrative way to make money online.
• Do not require any kind of qualification to start trading.
• Forex has many currency pairs, which offers traders diversity.

Cons:

• The forex market does not guarantee, it comes with lot of risks to lose your funds.
• Geopolitical events can greatly influence the forex market.

What is Crypto Trading?

You might replicate crypto trading with forex, although it has a different mechanism. Crypto trading involves buying and selling virtual or digital assets in a decentralized way. They are traded by individuals, banks, and even large groups of traders.

Furthermore, cryptocurrencies are not controlled by any government, unlike fiat currencies. These currencies are based on certain blockchains, from where all the transactions are recorded and proceeded in a secure, transparent, and decentralized way.

Albeit, the cryptocurrencies only exist in a virtual way and are also exchangeable for goods and services. However, according to Statista.com, the survey from 2019-2023, 56 countries have already adopted cryptocurrencies and Nigeria is on top of the list.

Some of the popular cryptocurrencies are Bitcoin, Ethereum, BNB (Binance Coin), Dogecoin, XRP, and USDC.

Pros and Cons of Crypto Trading

Pros:

• Highly profitable for investors.
• Crypto trading is highly decentralized, a secured to do transactions.
• It has low-transaction fees.
• It takes only seconds to transact cryptocurrencies around the globe.

Cons:

• Crypto trading is highly volatile and risky.
• Popularity, integrity, and adoption of cryptocurrencies fluctuates their own market, which might always go in your favor.

Difference Between Forex Trading And Crypto Trading

Forex and crypto are both profitable, but there are differences which are important to highlight. Let’s dive into it.

Market Hours

Market or operational hours means when the market opens or closes for traders and it is quite different for both crypto and forex. The forex market opens five days a week, from Sunday 5 PM and closes on the same time on Friday according to local time in New York. It typically opens after 48 hours.

In contrast, crypto market do not have these set operational rules. The crypto market is open for 24 hours and seven days a week with no break.

Forex markets have different trading sessions, depending open the city and country. Although, crypto traders do not have to wait for the markets to open to start trading.

Liquidity

Liquidity is a crucial concept in financial markets because it directly impacts the efficiency and cost of executing trades. Liquidity is another factor which differentiates the forex and crypto market. Forex is currently the most active market nowadays and it also have higher liquidity than the crypto market.

The forex market daily trading volume has skyrocketed from 2019 to 2023, growing from $6.6 trillion to $7.6 trillion. However, the crypto total market volume only settles at $21.99 billion, according to CoinMarketCap and daily trading volume falls between $100 to $200 billion, it depends on the purchase and sale of each coin.

EUR/USD pair is the highest liquid pair in forex market, while in cryptocurrency, BTC-USD has the highest liquidity with a market cap of 517.2B.

Number of Assets

There are 128 currency pairs on Forex market, divided into categories such as major, minor, and exotic currency pairs. The traders mainly target major currency pairs because of the liquidity  such as: EUR/USD, USD/JPY, GBP/USD, USD/CHF, NZD/USD, EUR/AUD, EUR/NZD, and EUR/GBP.  Although, you can also open trades for exotic pairs, which involve one major currency and one currency from a developing or smaller economy.

According to Forbes, there are more than 22,900 cryptocurrencies that are traded on different platforms, which offer traders more diversity than Forex. We have already mentioned the popular cryptocurrencies above. Additionally, forex currency pairs are considered to be more stable because of less volatility and regulation.

Volatility of the Markets

One of the main reasons why forex market is different from crypto is the volatility of the markets. Forex exotic and minor pairs have high volatility, but major currency pairs generally have less volatility. Cryptocurrencies are considered to be extremely volatile and prices of the coins and token fluctuates rapidly.

According to the graph of CoinMarketCap, the price of BITCOIN was $30,471, and it went to down to 25K in the mid of September.

In contrast, Forex In contrast, Forex market pairs do not have these high fluctuations, making it more safer for market pairs do not have these high fluctuations, making it more safer for investing and trading. In crypto trading, the traders usually wait for the market to get in a bearish position, so they can make high profits when the bull season comes. Additionally, Forex and crypto both do not guarantee profits. You must learn technical analysis and rudimentary strategies for making maximum profits in both cases.

Different Markets  – Different Risks

Forex and crypto are both lucrative investment options, however they also have associated risks with them. The crypto market has high level of volatility, security thread issue, and regulatory risks.

On the other hand, forex market is influenced by economic events, exchange rate, liquidity, and high leverage risks. Leverage is a great way to make money both on Forex and crypto future trading, however leverage ratio in forex is from 1:100 to 1:1000. So, higher the leverage, higher will be chances of potential losses. Therefore, it is indispensable for you to follow the best risk management strategies for forex trading.

Regulatory Bodies

Regulatory bodies in trading are government or independent agencies responsible for overseeing and regulating various aspects of financial markets and trading activities. Forex market is regulated by FCA (Financial Conduct Authority), CySec, NFA, and CFTC. It depends on the country. Every country has its own regulatory bodies for forex market.

As far as crypto trading is concerned, it is not legalized all over the world, thus do not backed by financial authorities like Forex. In the United States, cryptocurrency is legal and regulated by Bank Secracy Act.

Forex vs. Crypto: Which is More profitable?

It can be your biggest dilemma when you want to start trading. Forex and crypto are both great investing options. Although, it is quite important to not get flustered before you begin to trade in these markets. It is critical study about both of the markets, learn technical analysis, and practice with demo account.

If you are looking for short-term trading, then Forex is one of the best options. As for cryptocurrency, you can buy a certain token and hold it for one or two years. If the price go higher, you’ll make profit. However, it is not 100% guaranteed. Before buying any coin or token, you must read the news and do analysis to be on the safer side.

Bottom Line

Forex and crypto markets are both good way of making money just by using your phone or computer. Although, it requires learning, practice, and following the coherent trading strategies to make the right trading decision. In the above article, we have mentioned the differences of both the markets.