Let’s look at the advantages of Forex trading over cryptocurrency trading. By examining market stability, regulation, and established strategies, we’ll uncover why many people find Forex trading more appealing.
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Stable and established market
Forex trading tends to be more stable than trading cryptocurrencies like Bitcoin. You can see this by comparing how the USD/EUR currency pair moves compared to the price of Bitcoin (BTC).
Over the past decade, the USD/EUR exchange rate has experienced relatively steady fluctuations, driven by economic indicators and geopolitical events. In contrast, Bitcoin’s price has experienced significant ups and downs, surging from around $900 in January 2017 to nearly $20,000 in December of the same year and then crashing all the way down below $3,500 in November 2018. In 2023, BTC is trading in a flat mode, disappointing investors.
Regulation and security
The importance of regulation in ensuring funds security is evident. Mt. Gox’s (a major bitcoin exchange) catastrophic hack in 2014 resulted in the loss of 850,000 bitcoins, shaking the entire cryptocurrency industry. This event contrasts sharply with the regulated Forex industry, where brokers like AMarkets follow strict regulatory rules, providing traders with a higher level of security.
Time-tested trading strategies
Forex’s edge in trading strategies is well-illustrated by the prevalence of well-tested methodologies. Take the moving average crossover strategy, for instance. This method, which involves studying where different moving averages intersect, has been consistently employed by Forex traders. In contrast, the still nascent cryptocurrency market is prone to unpredictable price swings. For instance, Ethereum’s price surged from about $11 in February 2017 to over $1,400 in January 2018, only to drop to around $80 in December 2018.
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Complexity in cryptocurrency trading
The complexity of cryptocurrency trading becomes evident when we consider the various factors that can affect their prices. One such example is the influence of regulatory news on the price of Bitcoin. For instance, when China banned initial coin offerings (ICOs) in September 2017, the price of Bitcoin dropped from about $4,600 to less than $3,000 in just a few days. Such rapid and significant price fluctuations are less frequent in Forex trading due to the greater stability and regulation of the market.
Diverse strategies in crypto trading
Cryptocurrency traders use various strategies, such as trend following and swing trading. Trend following involves earning on prolonged price movements in a particular direction, as seen in Litecoin’s (LTC) rally from around $30 in December 2018 to over $400 in December 2021. Swing trading, characterized by shorter holding periods, can be observed in Ripple’s (XRP) price fluctuations from under $0.20 in December 2019 to over $1.50 in April 2021.
Information sources
Forex traders frequently consult economic calendars, central bank statements, and news releases. An illustrative example is the impact of the US Federal Reserve’s decision to increase interest rates, leading to the strengthening of the US Dollar (USD) against other currencies.
Cryptocurrency traders, on the other hand, depend on a variety of sources like tracking Twitter trends, staying updated on blockchain-related news, and closely following regulatory announcements. Elon Musk’s tweets, which can trigger substantial changes in the price of Bitcoin, underscore the significant influence of social media sentiment in the world of cryptocurrencies.
Summary
In the ongoing debate between Forex and cryptocurrency trading, Forex holds the upper hand due to its stability, regulation, and wealth of established trading strategies.
Cryptocurrency trading, while offering ample opportunities, is marked by its complex nature and susceptibility to external external factors. Aspiring traders should carefully assess their risk tolerance, strategy preferences, and market understanding before making their decisions.
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