In recent years, cryptocurrencies like Bitcoin, Ethereum, and Ripple have gained popularity as an alternative investment to traditional currencies traded on the foreign exchange market. This has led to a debate on which trading option is less risky – Crypto or Forex. In this article, we will explore the differences between the two and the level of risk associated with each.
Crypto Trading
Crypto trading involves buying and selling cryptocurrencies like Bitcoin, Ethereum, and Litecoin. Crypto markets can be highly volatile and are not regulated by central authorities. Therefore, they are more prone to sudden price fluctuations, manipulation, and security breaches.
Despite crypto flaws, there seems to be fast adoption in the middle east. A recent report by Chainalysis revealed that the Middle East and North Africa (MENA) region experienced the highest growth rate in the crypto market in 2022. The report indicated that crypto users in the region transacted a total of $566 billion between July 2021 and June 2022, representing a 48% increase compared to the previous year.
Also Read; Beginners Guide to Crypto Trading Strategies 2024
Forex Trading
Forex trading involves buying and selling currencies like the US dollar, euro, and yen. Just like crypto trading, forex trading is very common in the middle east.
Over the past five years, the Middle East has emerged as a leading hub for FX and CFD brokers. Following the global financial crisis of 2008, Dubai, in particular, experienced a surge in demand from financial service providers. In 2021 alone, Dubai International Financial Center (DIFC), a specialized economic zone in Dubai, recorded the highest number of company registrations in its history, with 996 new registrations, representing a 36% increase from 2020.
Differences Between Crypto Trading and Forex Trading
- Liquidity
The forex market is one of the largest financial markets in the world, with a daily trading volume of over $5 trillion. This means that there is a lot of liquidity in the forex market, making it easy for traders to buy and sell currencies. The crypto market is much smaller in comparison, with a daily trading volume of around $100 billion.
- Trading Platforms
Forex trading is typically done through traditional trading platforms offered by brokers or banks. On the other hand, crypto trading can be done through specialized crypto exchanges or trading platforms.
- Market Hours and Volatility
Forex trading occurs 24 hours a day, 5 days a week, whereas crypto trading is open 24/7. The cryptocurrency market is known for its high volatility. This means prices fluctuate rapidly and unpredictably. Forex markets are generally less volatile than the crypto market.
- Regulation
The forex market is regulated by governments and financial institutions worldwide. This means that traders have some level of protection. On the other hand, the crypto market is largely unregulated, which means there is a higher risk of fraud and other illegal activities.
- Trading Instruments
Forex trading involves buying and selling currency pairs, such as EUR/USD or GBP/USD. On the other hand, crypto trading involves buying and selling cryptocurrencies such as Bitcoin, Ethereum, Dogecoin, and Litecoin.
Also Read; 3 Best Crypto Trading Tools in 2024
Crypto vs. Forex: Which is riskier
The Forex market has been around for decades and has established rules and regulations that protect investors. Additionally, traders can access various resources and tools that help them make informed decisions. On the other hand, the crypto market is still in its early stages, with little regulation and a lack of transparency. Forex trading is relatively safer due to its centralized structure and lower volatility. In contrast, the crypto market is highly volatile, with no central authority. This makes it susceptible to unpredictable market fluctuations. Moreover, the crypto market has lower trading volumes and liquidity, making it challenging to execute significant trades.
Therefore, forex traders typically enjoy higher leverage, enabling them to undertake more substantial trades.
Final Thoughts
The crypto and forex markets are two booming markets in the middle east. In terms of the risk involved, the forex market might be a safer option.
