For all the beginners and newbies in the exchange market, cryptocurrency and forex trading might be alien concepts. Let us get to the basics first and then jump to the insight. Forex refers to the foreign currency exchange market. It is the largest and the most liquid market that is present in this world. The currency can be exchanged on Forex regardless of its nation of origin. It is spread around the globe and has immense significance in the financial domain. Cryptocurrency, on the other hand, is also known as ‘digital currency’. These are independent currencies that are used as an instrument of exchange. However, they are not bound by any government rules and authorities. Aside from not being bound by any country’s government, Bitcoin is also free of central bank authority. Due to its newness on the market, crypto is unfamiliar to a vast number of consumers. From time to time, it fulfills the function of traditional currency.
Foreign exchange market- Foreign exchange market is a global platform where currencies are exchanged for various reasons. It can be for tourism or commercial purposes or general trading. The international currency and exchange market, generally known as Forex, solves the problem of converting one currency into another.
Each country has a specific currency. For example, the US Dollar ($) is the signature currency of the USA, Indian National Rupee (INR) is the national currency of India, EURO (EUR) is the national currency of Europe. The use of these currencies is limited to the boundaries of their specific country. When it comes to international trading, that is where Forex trading comes into play. For example, if an importer in the USA wants to buy clothes from France, they cannot pay the French exporter in USD ($). In this case, USD will be converted into EUR before the transaction takes place. This is how forex trading acts as an intermittent link between two or more countries. In the same manner, commercial purposes are also resolved.
Forex also acts as a savior when it comes to the tourism industry. Tourism is all about exploring new places and their heritage. When people from a country visit another country for recreational and retreat purposes, it is known as tourism. An Indian cannot go to Europe carrying Indian National Rupee as it is not accepted there. They will have to get EUROs of equivalent value to visit Europe.
Even after having such remarkable significance globally, Forex does not have a physical or centralized marketplace. It is rather done on an electronic basis which is also known as over-the-counter (OTC). OTC refers to performing exchanges using electronic networks and computerized platforms rather than a centralized physical base. The market is working for five and a half days a week round the clock. Because of the time differences between all of the countries, Forex is active at practically every hour of the day in one of them.
Cryptocurrency- From its origins in the old barter system, cryptocurrency has made its way back into the globe. Think of it as a modernized barter system. The only difference being it is much more sophisticated and systematic. Barter system meant trading goods or services in return for goods or services. Cryptocurrency here can be bought using real money.
Types and worth: According to a recent survey, there are more than 6,700, unlike cryptocurrencies, that are being traded worldwide. They get their Initial Coin Offerings (ICO). ICO is similar to an IPO that is raised in the stock market on the launch of a new stock or division. In the crypto market, the same concept applies to ICO.
Among thousands of cryptocurrencies present all over the world, Bitcoin is the most popular. In recent studies, it was found that bitcoin was pitched at around $210 million. Have a look at the list of top 10 cryptocurrencies traded on a global level-
Better between the two:-
Many people argue that forex trading and cryptocurrency are similar concepts with minimal customization. This is not completely true. Both of them have their pros and cons.
Trading on a foreign exchange platform is much easier as compared to trading cryptocurrency. Forex being in play for a much longer time has gained an advantage over cryptos. Cryptocurrency is a relatively new concept and not familiar to many people. This is the reason investors trust forex over cryptocurrency. However, cryptos, on the other hand, are inflation-proof. Forex is impacted by inflation and government regulations. Cryptocurrencies are inflation-prone as they are managed by the blockchain.
If you are a beginner, experimenting with cryptocurrency can be a tricky move. It is a more complicated phenomenon as compared to forex trading.
Another aspect to think about is the budget in hand. Forex trading is possible using minimal investment, whereas cryptocurrencies require a comparatively higher investment to start with.
Trading in itself can be a risky concept without appropriate knowledge and experience. But if done with precision and guidance, it can yield fulfilling results. Get proper supervision before deciding to invest in either forex trading or cryptocurrency. Happy trading!