Ever since Bitcoin arrived at the trading scene a few years back, people have been overly eager in their attempts to compare it to virtually anything. Its new, its exciting, and its something the common folk could easily dabble into without the government and the banks getting involved. The financial crisis of 2008 has made people wary of those and its no wonder that so many have flocked to cryptocurrencies as a result. Yet, a lot of them are still skeptical about bitcoin, much like they were skeptical about forex trading in the 90s when they were calling it just another scam. Nowadays, we should know better than to judge something because its different, as forex trading has turned into a free market paradise with five trillion dollars being traded every day, making it the most liquid market on the planet. Therefore, lets take a closer look at these two and discover just how similar or different they truly are.
Whats Bitcoin?
Bitcoin is often considered to be the flagship of all cryptocurrencies out there, due to it being the most successful one so far. Even though theres the word coin in its name, just like any other digital currency it has no physical form and remains purely digital. Whats unique about bitcoin is that it isnt linked to any central government or bank administration, making it the first decentralized digital currency on the planet. The way it works is through direct peer-to-peer transactions where the proof of these transactions is then stored on a public ledger that uses cryptography-based technology called blockchain. This means that its price is solely governed by the actual people trading it as well as the overall traded amount.
Whats Forex Trading?
The foreign exchange, or forex for short, is based on the exchange of one fiat currency for another. For example, the two most common pairs exchanged are the USD and the EURO. The gist of it is that you want to be buying one of the currencies while its value is low, and at the same time be selling the other one while its value is high to earn a profit. The difference in value is rather small, usually a few pennies (usually called pips), which means you need to exchange extremely large sums of money in order for it to be made worthwhile. This is why finding a credible forex broker can be a real game changer, as leveraging money allows you to make much larger transactions and get better profit margins as a result. In addition, as forex trading is done online, these platforms are absolutely necessary for conducting and monitoring trade and will be your main tools in this regard.
The Similarities Between Them
As previously mentioned, both of these are traded online and neither is linked with any institution (well, forex is to some degree), making them accessible to a much wider audience than stock exchange. Due to this, they also share similarities in how they operate. For example, if youd put two charts, one bitcoin and the other forex, youd see that they have some common indicators such as averages, volumes, and oscillators in various pairs. Whats more, theres a certain human element in both of them, as these transactions are not made by robots but by human beings. Meaning, that people tend to make same mistakes repeatedly.
The Differences
The first difference, although minor, is the fact that bitcoin trading is done 24/7, whereas forex trading does not operate during the weekends; though you can still utilize different time zones to lessen the gap during weekends if you wish. Next, both share a certain level of volatility. However, bitcoins levels far exceed those of forex trading. This is because bitcoin is still relatively new and not as established as forex trading has become. Generally its not a bad thing, and in fact volatility is the thing that allows you to make a profit in the first place. Despite this, huge oscillations in prices make bitcoin a lot less predictable than forex trading which means bitcoin traders will have a much harder time sleeping at night. Furthermore, there are security issues with both of these. Yet, shady brokers are peanuts compared to the sophisticated hackers that pose a serious threat to the bitcoin market and the internet in general. There have been instances where bitcoins have been lost such as the Mt Gox case in Japan which saw thousands of people losing all of their bitcoins. Improvements have been made and security tightened but theres always a chance another cyberattack will ensue sometime in the future.
In conclusion, it all comes down to general preference. There are opportunities and risks on both ends, with forex trading perhaps being the more stable and established option. Nonetheless, bitcoin trading still has something to offer for all those willing to give it a chance.
