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What is the difference between forex and crypto trading?

We often get asked similar questions for both Crypto and Forex trading, so we decided to put together a few differences.

Forex trading in the UK is one of the most popular forms of trading because it has been around for many years and gives traders access to ‘the world’s market’. 

That said, however, there are many more factors to consider when looking at Crypto trading in the UK, which will be outlined in this article.

The main difference between these two markets is that cryptocurrency does not have a centralized authority or clearing house overseeing transactions. 

In forex, all trades happen through an intermediary such as a bank or brokerage firm, while these institutions do not play an essential role in cryptocurrency exchanges.

Cryptocurrency is often compared to gold because there is a finite amount. Currently, 16 million Bitcoins are available, which has value because of their scarcity. 

With forex, you must find someone willing to buy any Currency you wish to sell your own for, and it is no different with cryptocurrencies. If people stop buying them, they will lose their value. 

The critical factor here is supply and demand; the more buyers look for something, the higher its price.

The other significant difference between Crypto trading in the UK and Forex trading would be taxation. 

Exchange rates are also a factor because market forces generally set Forex rates while there is less volatility with cryptocurrencies. 

Cryptocurrencies depend on demand for their value, whereas with forex, you can make reasonable estimates of how something might perform due to historical data and economic trends.

One final difference between these two markets is the transaction speed; cryptocurrency transactions take much longer than exchanges or bank transfers. 

One significant advantage of this is that the fees involved when transferring cryptocurrencies are almost negligible compared to fiat currencies like GBP and EURO.

The second important factor would be what you want to get out of trading, both assets (currencies) are traded on speculation that something will be worth more, but you can also make money by simply trading for day to day profits. 

It is vital to remember that Forex trading has been around for much longer, which means there is a lot more information out there, but this does not mean Crypto trading isn’t an attractive prospect for many traders.

There are many reasons some may consider trading in cryptocurrency, but a few might have little to no idea what it is or how to begin.

For those who don’t know the difference between forex and crypto trading, this article can help you understand it a little better.

Forex Trading

Forex or foreign currency trade refers to the trading of currencies on the global market for potential profit. 

It primarily differs from cryptocurrency trading in that it involves using actual government-backed currencies, while crypto focuses primarily on digital coins and tokens. 

Forex is about making money from real currency’s fluctuating prices and not investing in unregulated Internet coins. 

However, this doesn’t mean that you can’t make money from cryptocurrency. 

It just means that there are other alternatives, such as CFDs (Contract for Difference) which allow you to get involved with cryptocurrencies without actually owning them like you would with an Initial Coin Offering (ICO).

Crypto Trading 

Crypto trading involves using cryptocurrency, a digital or virtual currency that operates independently from a central bank. 

It’s one of the newest investment vehicles to have sprung up over the last couple of years thanks to its primarily unregulated nature, but it has managed to take off due to how profitable it is. 

So much so that many countries are beginning to put legislation in place for cryptocurrencies, though there will likely never be enough regulations in place for it ever to be truly safe. 

The market itself is well-known for being unstable and dangerous, with frequent fraud and insider trading cases often occurring, but this isn’t stopping investors from making money off these digital coins. 

Due to their decentralized nature, they can also send them across borders without being held up by red tape or bureaucracy.

For more info, link to Saxo Bank.