Cryptocurrency trading, just like forex, involves trading currencies. However, the forex market is broader and well established, while the cryptocurrency market is a relatively new player on the scene.
Forex involves brokers, brokers and various other institutions that usually collect commissions at almost every stage of the trading process. However, in cryptocurrency trading, there are no intermediaries and this is probably the biggest attraction. Another important difference is using a crypto heatmap to know about the latest price changes.
If you are wondering what type of trading to start with, this article may help you. We will take a quick look at both cryptocurrency trading and forex trading before comparing them on different fronts. Let's begin.
Cryptocurrency trading landscape
As mentioned above, cryptocurrencies are a relatively new entry in the financial world. Compared to forex, it's a much shorter period of time, but that doesn't really make it any less formidable in the trading field. Since Bitcoin's creation in 2009, cryptography has been in place, although it has seen sporadic rise and fall in its value. Over the span of ten years, however, despite the emergence of rival currencies and tons of scams, Bitcoin still remains a powerhouse in the cryptocurrency world.
The role of cryptocurrencies as a digital asset is to serve as a decentralized medium for peer-to-peer transactions. Due to its nature and independence from central banks and governments, it has become an alternative source of funds and exchanges for many people in recent years. This is a huge leap from the early days of cryptocurrency, when it was primarily used in the black market.
To date, over 40 million cryptocurrencies have been created and over 1,600 cryptocurrencies in existence. With a steady growth rate since 2016, it is safe to say that the cryptocurrency market has become very popular with traders in recent years.
In addition to multi-currency wallets for digital assets, there are companies that have already enabled the use of crypto as a means of paying for services and products. This opens up new opportunities to talk about the future liquidity of cryptocurrencies and fiat-to-crypto exchanges (and vice versa) to increase trading volumes.
Bitcoin is definitely a cryptocurrency to keep an eye on. However, there are other good options to look out for if you want to invest or trade cryptocurrencies. For example, check out LTC (Litecoin) for fast transactions or Dash which guarantees nearly untraceable transactions. There are, of course, many other things to check.
Ultimately, the currency you choose will depend on how you prefer to conduct your transactions, so be sure to do your research beforehand.
Let's talk a little about the differences between investing and trading cryptocurrencies.
When people decide to invest in a cryptocurrency, it usually means they are buying, say, Bitcoin for the long term. They believe the price will rise, regardless of other factors that may prevent it along the way. Those people believe in technology and the idea behind the currency and want to invest in it with the hope of a future return on investment.
Cryptocurrency traders, on the other hand, buy / sell Bitcoin (we are using Bitcoin, as an example only), in order to make a profit. Traders see cryptocurrencies as a tool for making profits, unlike investors. Sometimes they may not even study the ideology or technology behind the product they are trading. Furthermore, cryptocurrencies are very volatile. You can only make money if you can correctly anticipate what will happen in the market.
As the cryptocurrency landscape is relatively new, there aren't many factors that can cause price changes. The fact that they were designed as decentralized assets, free from any government / banking control, things like rate changes, political factors, data release, etc. It doesn't affect them as much as fiat currencies and the forex trading market, as a result.
There are several factors that could affect cryptocurrency prices. These include:
Security flaws, resulting in attacks on cryptocurrency exchanges;
Countries announcing to ban cryptocurrencies: Disagreements on updates. For example, when a cryptocurrency undergoes a hard fork (this can happen when a Blockchain diverges in two separate directions);
One last thing you need to know about cryptocurrencies is that every cryptocurrency