By Amie Parnaby

Until about 18 months ago, crypto-currencies were only making ripples in the trading news pond. We knew they were there, and they seemed to be making some profit for the people who got in early. But it wasn’t a very big deal in traditional trading circles and they were seen as something significantly separate as to be able to be ignored.

Most traditional traders disregarded Bitcoin as an insignificant upstart, with no future in it. However, some have seen its potential and run with it, and later with other crypto-currencies too.

Now of course, it is clear to see that crypto-currencies will be around for a long time to come, and as such they need to be included in trading strategies as something that could potentially have an effect on investments.

In this current global trading market, some traders are now asking the question, “Should I stay in Forex or move to Crypto?”

There is a polarised debate in the trading markets about Forex vs. Crypto. On one side of the argument, Crypto is the future. On the other side, Crypto is heading for a major crash and possibly even a wipe-out.

There is a pretty balanced pro/con argument for both currency types, with some of Crypto’s pros being Forex’s cons and vice versa. Here is a short comparison of the two in various criteria.

Volatility/Stability 

Forex – The forex markets are very stable, consistently exhibiting only 1% variability across the markets. Large-scale fluctuations are rare. Lack of volatility in Forex can mean that realising consistent profit can be challenging.

Crypto – Crypto volatility creates a near perfect situation for considerable trading ranges. Fluctuating values between 5% and 10 % are not rare and even as high as 15% volatility is not uncommon.

Conclusion: This is a win for Crypto, with volatility being a benefit to Crypto traders and stability is both a benefit and a drawback to Forex traders. 

Cost

Forex – There are several costs associated with Forex trading such as commission costs, swap, and spread.

Crypto – There are limited costs associated with buying Crypto.

Conclusion: This is a win for Crypto. Forex really does have the higher costs associated, often with someone in the middle taking those costs as profit.

Leverage

Forex – Given that profits in Forex can only be made by trading large volumes, leverage is readily available for high liquidity currencies, with brokerages offering up to 1:500 in leverage.

Crypto – Crypto-currencies don’t trade like fiat currencies. They can only be bought outright, not traded on margin. There are no contracts for difference (CFD).

Conclusion: We can call this a draw. While considerably higher leverage on the Forex markets can allow for larger profit realisation, the outright buying of crypto-currencies will allow the investment to drop in value, but a trader will still own them and can wait out the dip. Higher leverage in the Forex markets can also wipe out a trading account if the trade makes a significant loss.

Liquidity

Forex – The sheer scale of the forex market guarantees a high level of liquidity, with broad-ranging currency pairs to trade. There is never any shortage in the amount of currency traded. Annual Cash trades are estimated at around 5 Trillion.

Crypto – Comparatively small volumes of coins to trade and rarely any large volumes in one “place” for purchase. Conversely, few exchanges are large enough (or rich enough) to handle large sales of coins such as Bitcoin, unless acting as a broker.

Conclusion: Forex definitely wins in the liquidity stakes. The reason is that crypto-currencies are generally held by retail traders, which means there are no large-scale institutions holding vast numbers of crypto-currency

Insulation 

Forex – The Forex market is not insulated from the global economy – it is driven by it. Consequently, prices rise and fall in correspondence with internal and external factors, most of which are newsworthy and able to be tracked and counteracted.

Crypto – Due to their decentralised nature, crypto-currencies are not affected by the same socioeconomic and geopolitical incidences that affect fiat currencies. By the same virtue, you can’t really use news events to predict the price action.

Conclusion: This is another draw. Both the Forex and Crypto markets can see this as a benefit and a drawback.

The Bottom Line

Considering all of the variables covered above, it is pretty close to a 50:50 split on pros and cons depending on your trading style, preferences and requirements. The only person who can tell you which way to jump is you. There is no quick substitute for doing your own research on this subject, and I don’t think any trader can say otherwise.

About the Author:

Amie Parnaby is a professional writer with an experience in a broad range of industries, from I.T to training, from optics to banking. Within these settings, Amie has provided quality web content, training materials and technical documentation. She is currently an in-house Content Writer at Leverate.