idhealt.com — Trading Forex Vs Crypto: Which is Better? – Forex trading is becoming a popular choice for many traders around the world. However, the popularity of crypto in recent years has made many traders glance at it. Moreover, recently many new technologies have been integrated with cryptocurrencies.
However, the popularity of forex has not been completely replaced by crypto. Some traders even choose to trade forex and crypto simultaneously to diversify their portfolio.
Even so, trading in more than one asset may not be an option for all traders because it has the potential to increase trading costs. For beginners or traders with tight capital, the choice of trading forex or crypto can be a dilemma in itself.
Understanding Forex Trading Basics
To solve the problem, traders must first understand the basics of the two assets. After recognizing it, traders will find it easier to know which asset is a better fit.
Forex is sometimes referred to as foreign exchange or the process of exchanging foreign currencies. Because it involves buying and selling between two currencies, forex market analysis is much the same as comparing the economy of one country to another.
The goal, of course, is to be able to take advantage of changes in currency values in order to generate profits. This activity has been going on for decades, has market participants from all walks of life, and has a transaction value of up to trillions of rupiah every day.
Forex traders use both technical and fundamental analysis to analyze price movements. Traders will take advantage of brokerage services to be able to open positions on the currency pairs they want.
Most of the brokers that provide Forex trading are regulated. In Indonesia, Forex Trading is regulated and supervised by CoFTRA. But unfortunately, brokers sometimes have various additional fees that can cause trading capital to be eroded, such as spreads and trading commissions.
Cryptocurrencies are digital assets that run on a blockchain network. Not just for transactions, crypto money can have a variety of uses. Crypto trading itself is the activity of selling and buying digital assets such as cryptocurrencies, tokens, and NFT (non-Fungible tokens).
Not much different from forex, the value of crypto also goes up and down according to supply and demand. But the price drivers are much different from forex. For example, when a crypto project gets an injection of funds, the price of a coin can skyrocket.
Currently there are countless crypto coins and tokens on the market, but not all of them last long. Some crypto projects have even become fake pump and dump schemes.
In fact, many crypto projects have turned out to be scams under the guise of MLM. The lack of regulation of crypto assets causes traders to be very careful when investing in new coins.
How Forex trading differs from crypto
Broadly speaking, both forex and crypto both involve ‘currency’ trading. But the difference is that forex trades fiat currencies which are accepted as the main medium of exchange in their country, while crypto is only accepted as the official medium of exchange in a certain number of countries. What is the difference between forex and crypto?
1. DEX vs CEX
The basic difference between forex trading and crypto is decentralization and centralization. Crypto has the concept of a DEX or decentralized exchange.
That is, traders have more control over their crypto assets as there is no entity that regulates their trades. DEX also has cheaper transaction fees than CEX.
In contrast, the CEX or centralized exchange used by the forex market has the opposite concept. However, this type of transaction has higher liquidity. In addition, centralized exchanges can be backed by stronger regulation.
2. Market Participants
At the beginning of its emergence, most of the crypto market participants were miners or retail traders. They generally buy these assets in small amounts. As the crypto market grows, more and more large traders and companies are buying crypto in bulk.
On the other hand, in forex trading, there are many banks and multinational companies that dominate this market. Governments and central banks are also big players in the forex market.
While there are technologies available that allow small traders to participate, institutional traders and hedge funds remain the most influential.
So you could say, originally crypto was made for retail traders, while forex trading was devoted to big players. Over time, large companies began to get attracted to the crypto world, while small players were ‘welcome’ to open positions in the forex market.
According to some studies, about 65% of forex traders experience losses. The cause of losses when trading forex can be even greater because of the leverage and margin system offered by forex brokers to retail traders. Due to the risks, the use of high leverage for novice traders is not recommended.
The final word
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