The Difference Between Forex and Cryptocurrency Trading

Forex and cryptocurrency trading allows individuals to have a steady income stream. While both involves currencies, there is a whole world of difference between them. Forex involves real currencies such as US dollar, British Pound, or Japanese Yen. Cryptocurrency, on the other hand, trades using digital currency. In this article, Robert Peter Janitzek shows us the difference between forex and cryptocurrency trading.

Mechanism

In forex trading, the supply of fiduciary currency is highly regulated by central authorities. To make a profit, you need to analyze the patterns of the currency pairs. Cryptocurrencies, on the other hand, get their supply from an exponential algorithm which is designed to reduce cryptocurrency inflation as supply increases. Another difference is that with cryptocurrency, the supply is mostly finite. With forex currency, money can be printed incessantly at the whims of central banks and governments.

Distribution

Several major players in the cryptocurrency world have the belief that Bitcoins and Altcoins are immune to inflation. This is largely true with respect to monetary inflation but not with respect to price-level inflation. Robert Janitzek explains that like Bitcoins, other cryptocurrencies has a finite mining and distribution volume. The limit for mining and distribution of Bitcoin, for example, is exactly 21 million.
With forex, governments can print fiduciary currencies whenever they want. For this reason, the factors that can affect the price movement of FX is not only limited to a country’s debt level, political stability, and GDP. Trading in cryptocurrency is mostly fueled by speculations.

Demand

One advantage of foreign exchange currencies over cryptocurrencies is uniform demand because of government control and general usability. On the other hand, the demand for cryptocurrency is influenced by factors such as adoption, public confidence, and market emergence.

When trading on cryptocurrencies, emerging markets accepting cryptos will consequently emerge as public demand for them increases. Recently though, numerous initial coin offerings were infiltrated by blockchain enterprises as well as their mouth-watering profits. Most investors check ICO lists and select the ones they deem best suitable to their target profit within a certain period of time.

While the fundamental and technical analysis required to trade both markets are more or less constant, cryptocurrency is still pretty much under study. Both markets are volatile so it will require some kind of strategy to become successful. You also need to understand the risks involved and be smart with your transactions.

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