A lot of people see the forex and cryptocurrency markets and assume that they're somewhat similar, but, in reality, they are vastly different. Someone coming from forex investing will need a lot of time to adapt to crypto investing.
Someone coming from crypto, on the other hand, might not like some of the characteristics of the forex. This is why you need to know the specificities, benefits, and limitations of each before you get started. Let's take a look at some of the ways both markets and financial instruments differ.
One of the first things you have to know about crypto is that getting in and trading crypto for fiat money is not as simple as exchanging money over the forex. First of all, some exchanges don't even allow you to do that, and second, you will need to get a wallet first to store, or should we say, authenticate transactions on the blockchain.
There are some exchanges, however, that are trying to make things easier for investors. Cryptology is a great example. They will allow you to buy crypto and futures contracts directly with your credit card through their platforms. But this isn’t something you can expect from all exchanges, so inform yourself before joining any of them.
Bitcoin was worth a few thousand dollars just a couple of years ago and is around the $30,000 mark at the time of writing, coming from a $68,000 peak. No currency on the planet will give you this kind of return. This is because cryptos don't behave like currencies. They are much more like commodities in the way they move. So, you can expect roughly the same type of action when investing in crypto.
This volatility also has some downsides. As a matter of fact, it might be crypto's biggest downside. The wild swings crypto is known for are amplified by the fact that most observers often don't understand them. Crypto is not like other assets that can be swayed by the opinion of a few mainstream institutions or central bank moves. They act based on the raw laws of supply and demand and something as silly as Elon Musk making a show appearance can send coins and the whole market spinning.
Forex is more stable which makes it a better option as a store of value at the moment. It also doesn’t require constant monitoring like crypto.
The last big difference we’re going to mention is that cryptos, unlike national currencies, are not attached to economies. Most of them are attached to specific projects or have specific goals. XRP, for instance, was made to facilitate transfers between banks and remittances.
Golem allows people to borrow power from its network using their token. Even Ether is meant to be used as fuel to power apps over the Ethereum blockchain. This means that you can invest in projects that you find interesting and gauge whether there will be demand for the coins attached to them.
As you can see, forex and crypto are not the same and you have to know how they differ before you invest your money in any direction. Take the time to study both markets and the pros and cons of each before you make any decision.
