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Differences between Crypto & FX trading

In recent years, crypto trading has grown tremendously and is now more mainstream than before, thanks to advancements in innovation and technology. The rise in blockchain and cryptos has captured traders’ attention, and everyone is now afraid to lose out on huge gains in this market.

The FX market is significantly different from the crypto market because currency exchange rates hardly move. The leverage applied to foreign exchange is the key factor that appeals to traders in this market. That being said, these two markets are similar in a few ways. 

The main similarity is that these both involve the trading of currencies. The difference is that forex involves trading fiat currency, and its counterpart involves digital assets like tokens, NFTs, and, most popularly, cryptocurrency. Like any other market, the trader’s goal is to make a profit.

Differences between the forex and crypto markets

You’ll be dealing with currency whether you are in the crypto or FX market. Other than the difference in the type of traded currency, there are other major differences in this market.

1. Market Size

One of the most significant differences between the forex and crypto markets is the market size. For decades, the FX market has been the biggest worldwide in regard to trading volume by a large margin. It is still the largest market, reportedly trading $6.6 trillion every day according to BIS (Bank for International Settlements) in 2019. 

This value was a 29.4% rise from their previous report released in April 2016. In comparison, the cryptocurrency market’s cumulative market cap as of May 2020 was about $256 billion. 

Because of the forex’s massive size, it offers various levels of liquidity and volatility. Start with currency pairs from the more stable countries if you are a novice. These offer more protection against significant losses. You can also expand your portfolio slowly after learning to trade simpler pairings. This takes the pressure off your back as you won’t have to deal with anything you find incredibly complex to manage.

2. Anonymity

Cryptos initially took off because the market fosters anonymous transactions. Due to this, government intervention on top coins like Ethereum and Bitcoin has increased over the years, slightly affecting traders’ abilities to hide their identities. However, smaller and emerging coins still retain higher levels of anonymity. Overall, the cryptocurrency market offers the most anonymity compared to other markets.

Forex transactions are heavily regulated by a web of the interbank market (financial professionals) and forex brokers. Since 2014, the former has incorporated a KYC (know your customer) standard, which requires every trader to provide personal info if they want to access an exchange. This is very different from the crypto market.

3. Volatility and Liquidity

The crypto market is much smaller than forex; hence, smaller money volumes can move the market substantially. Say an extra $256 billion was injected into the market; it would be reasonable to expect market prices to double. If this same amount were injected into FX, it would only represent about 4%. Because of this very reason, the cryptocurrency market is more volatile compared to the foreign exchange market.

The more volatile a market is, the riskier it is for investors. Such a market is characterized by a higher chance of a tremendous upside and enormous financial losses. Higher volatility also translates to less liquidity since more traders naturally gravitate towards a smoother marketplace. Cryptocurrency is also a decentralized market because it’s new, making it pretty unstable.

Because of the foreign exchange market’s high liquidity and low volatility, it is able to absorb economic shocks better. Even in tumultuous economic times, that is more beneficial to the average trader or investor. To succeed in the crypto market, you have to conduct in-depth research and gain experience.

4. Market opening times

The crypto and forex markets are different in terms of market opening times. Forex is open on weekdays, five days a week. On the other hand, the crypto market is open 24/7, 365 days a year. This means that forex traders and investors have limited trading time. On the other hand, you can trade the crypto market anytime.

5. Type of currency traded

The FX market involves real money, while the cryptocurrency market trades digital currency. If you want to earn a living from your investments, forex might is more popular, although both are good options. The crypto market requires you to deal in digital currency, which could be on some level compared to investment in gold. You won’t be getting real money deposited directly into the bank.


Now that you understand the differences between forex and cryptocurrency trading, trading in these different markets is easier. If you intend to diversify your portfolio, you can invest in both markets. The most important part is understanding the nature of each market and, when getting into crypto, consider the frequent price swings.

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