For some time now, people have had access to financial systems and instruments to trade which allowed them control over their own financial future. The training that was conducted was reserved primarily for regular stock markets. However, that is not the case and more. Today we have Forex and Bitcoin.
Both Forex and Bitcoin have been labeled as scams as vessels to steer clear from. However, the market analysis shows us that the 5.3 trillion dollars that are traded daily is by no means a scam. Now with the inclusion of Bitcoin in the arena, we hear the same prejudices that were so popular with Forex.
Many people claim that Bitcoin is a fluke and the same criticisms that were said about Forex are being brought up with Bitcoin. But as history has proven, both Bitcoin and Forex, despite how new they are in the world of day traders, are here to stay. However, the question still rises, which one is better? Is Bitcoin safer to trade than Forex? Or is Forex better in the long run than Bitcoin?
Brief History Of Bitcoin And Forex
Since the adoption of the “gold standard” implemented in the late 19th century, the exchange of foreign currencies has intrigued traders. To determine a currency's worth based on gold has established the standardized method for evaluating the currency. Over time, speculators and hedgers have swapped currencies for profit and to preserve their wealth.
With the advancement of technology, the global currency was switched from the physical to an electronical. The international currency exchange began to revolve around a newly digitized ‘over-the-counter' forex marketplace. This transfer of funds gave birth to Bitcoin.
In 2009, a computer programmer invented the digital currency which everyone in the world has come to know as Bitcoin (BTC). BTC soon became the standard for a budding asset of internet-based modes which were labeled as cryptocurrencies. When BTC became accepted by the digital world and other consumers, its popularity grew.
Today, there isn't a trader who hasn't heard of BTC or other digital currencies. The world has since labeled cryptocurrencies, whether BTC or other digital currencies as the new currency. The idea is to do away with the old transfer of fiat monies to the digital currencies that can bridge the gap between countries.
If you are deciding to trade Bitcoin or Forex, it is essential to evaluate the size of each market. The rule of thumb follows the more significant the market, the higher profit, liquidity, stability, and depth you have to make informed decisions. The law is valid for Forex and Bitcoin as well.
Forex is the largest marketplace in the world. People from all around the world engage in forex trading on a daily basis. The average daily trading went from $1 trillion in 1998 to $5 trillion in 18 years.
Bitcoin, on the other hand, is relatively new and thus provides a smaller market. While there are several digital currencies one can trade, BTC offers a predetermined limit of 21 million.
When comparing BTC with forex, it is clear that forex offers a broader range of assets to trade. However, BTC has shown a more profitable jump. In 2017, BTC rose to a higher rate than gold, coming in at $4,000 for a single token.
The market cap for Bitcoin was valued at around $70 billion with a daily turn over that exceeded $1 billion. Yet, when you look at the least traded currency on forex, the Swiss franc, with a daily turnover of $243 billion, you can see that the Bitcoin market is a tiny blip to forex.
Pros And Cons Of Bitcoin
When looking at Bitcoin from a forex standpoint, it is clear that BTC can't hold a candle to it. However, the BTC offers several advantages of forex. With the BTC comes volatility. Because BTC is limited, this creates the perfect conditions for strong daily trading. Due to the value fluctuating by more than 5%, it gives traders a greater range to make a profit.
The BTC also provides easy exit and entry to the trading platform. All one needs is a cryptocurrency broker or direct market access to start trading the digital currency. With BTC, costs per transaction are also limited. Brokers usually require a fee which is based on the amount traded.
However, if one goes to the market without a trader, the fees are slashed. The cutting out of the middleman makes the digital currency more attractive and allows the trader to put more funds into the trade without having to worry about the extra fees associated with brokers.
Another plus to BTC is the fact that the currency isn't subject to fluctuations that are created by the conventional currency stimuli. Simply put, the BTC does not rise or fall due to a country's stability or economic performance.
On the other side, Bitcoin and other digital currencies have a few drawbacks. Due to the currencies being online, there is a chance for hackers to crack the blockchain and gain access to the funds. There are also glitches that happen due to technical issues of the platform. These glitches can be quiet costly. Because there is no industry standard for BTC, each exchange offers traders a unique suite of leveraging options.
Pros And Cons Of Forex
With Forex, you will find that it offers several favorable assets that BTC does not. When it comes to the liquidity of forex, you will see that the market offers a wide range of popular currencies. The diversity of forex provides minor and major pairs for daily trade.
Forex offers stable exchange rates. While fluctuations do occur, the degree of the change is fractional due to the volumes of currencies being traded. As for the leverage, brokerages offer a 50:1, 100:1, and 200:1 to their clients.
Although forex offers a wider net than that of BTC, the forex market does have some drawbacks. One of the major issues is the lack of pricing volatility which can make regular profits from exchange rates a challenge. The inclusion of investment banks and other third-party financial institutions is a huge disadvantage to retail participants. The costs that are associated with each exchange can be substantial.
Bitcoin Vs Forex Conclusion
When looking at Forex and BTC platforms, it is clear that you are comparing apples to oranges. While both offer electronic trading, the size, behavior, and structure of each platform are extremely different.
While some will look at BTC as the new world currency and drop all their eggs into one basket, others will see the forex platform more stable. There is no real way to say which will outlast the other. Unless by some chance, the world drops fiat currencies and goes strictly digital, both have their advantages and drawbacks.
Instead of trying to decipher which one is better to invest in, the best thing to do is pick the one that best suits your trading style.