Mar 26, · Malinsky also went on to explain that the most evident difference between BTC and forex markets is – bitcoin started and began to scale with the help of global retail trade instead of institutional players. Something that forex did not do. Dec 19, · He explained that the biggest difference between forex and BTC markets is that unlike forex, bitcoin started and scaled via global retail trade and not via institutional players. Bitcoin is a CryptoCurrency while Forex Trading is buying and selling between currency pairs. The price of the currency reflects the country’s economy, to some extent, and buying and selling is .
Difference between forex and bitcoin tradingBitcoin vs Forex: Understanding The Differences - FXCM UK
Some of the most popular currencies to trade have incredibly high daily trading volumes. The below graphic highlights just how severe the disparity is between the daily trading volume in the forex and bitcoin markets.
Find out more about what moves the forex markets. In markets with low liquidity, such as bitcoin or some of the more exotic currency pairs, it may be difficult to find another market participant to take the other side of your trade. For bitcoin, this problem is exacerbated by the fact that transactions are spread across multiple exchanges. However, when you trade with IG using derivatives such as CFDs and spread bets , you get improved liquidity because we source our prices from multiple venues on your behalf.
This means that your trades are more likely to be executed quickly and at a lower cost. For instance, if an asset experiences lots of highs and lows in a short time frame, it is considered to be highly volatile. Generally speaking, bitcoin is more volatile than forex pairs, which tend to move in narrow bands rather than experiencing large shifts. However, because of the high daily volume of trades, forex pairs still move a lot within these narrow bands.
Bitcoin, by comparison, tends to move more significantly, sometimes up to hundreds or thousands of dollars in a single trading session. Volatility in bitcoin is attributable to the fact that a small number of individuals hold a large proportion of bitcoins.
Therefore, if one trader who holds a lot of bitcoin were to sell their share, it could flatten the market. Such players are referred to as 'whales' in the cryptocurrency world due to the proportion of bitcoins they hold. You can take advantage of small or large price movements using CFDs and spread bets, with the option to go long or short. With spread bets, you bet an amount of money per point of movement, and with CFDs you buy or sell a number of contracts, with your profit being determined by the difference in price from when you buy and sell the contracts.
Bitcoin is a relatively new market, especially when compared to forex, and so the technology used — such as blockchain — is still in its infancy.
As a result, one of the main risks with bitcoin trading aside from volatility is that there is no telling how the market will develop in the coming years. Equally, a bitcoin 'wallet' — where buyers store their coins — can be accessed if a hacker is able to find the private access key. As a result, bitcoin has its own set of risks that are consummate with the technological nature of all cryptocurrencies.
The primary risk in the forex market comes from the factors which affect the price of a currency pair such as the interest rate differential between the two currencies in that pair. Additionally, the forex market is similar to other over-the-counter OTC markets. While counterparty default may not be that big of a risk, it is still present in the forex market — especially if a brokerage firm defaults or collapses. While there are always risks with trading, by speculating with a CFD or spread betting account, you can use stops and limits to manage some of your risk.
Bitcoin and forex do not have a single central authority tasked with regulating market transactions. While the forex market is an OTC market, the banks which carry out a vast majority of daily FX trades are heavily regulated. For bitcoin, transactions are verified by other participants on the blockchain network which bitcoin uses to process data. There is no central bank or inter-governmental body tasked with regulating bitcoin transactions.
As a result, there is no way for a bitcoin buyer to get their stolen coins back if they were subject to a hack or exploit in the system. This is different to forex trading because, generally, a regulator would require a bank to have safeguards in place to guarantee funds in the event of a theft. Learn more about cryptocurrency regulations around the world. Our client's funds are held in segregated client bank accounts at regulated banks, meaning your money is protected should anything happen to IG.
Typically, the forex market is seen as more accessible than bitcoin because it can be traded directly through a broker and there is a higher number of market participants to take the other side of a trade. In contrast, bitcoin trading is less liquid and requires a wallet and exchange account. The latter can be expensive to maintain, while there are often limits on how much you can deposit.
However, by trading CFDs and spread bets, you can speculate on the price movements of forex pairs and cryptocurrencies without ever taking ownership of them. Trading forex or bitcoin with CFDs and spread bets should only be done by traders who understand all of the inherent risks.
With that being said, there are a number of steps that you can take to limit your exposure to risk while trading CFDs and spread bets with IG. While forex and bitcoin may seem a little different to each other, the dangers that traders should be aware of are the same for both markets. Primarily, like all forms of trading, both forex and bitcoin trading involve risk.
To mitigate this, traders should not enter any positions without having a viable risk management strategy in place first. With IG, you can trade over 16, markets with CFDs and spread bets — and both can be opened on leverage.
Leverage enables you to spread your capital further by putting down a small deposit called margin, while receiving full market exposure. However, while leverage can increase your exposure to a market, it can also amplify your losses. As a result, it is important that traders understand how to use leverage in a responsible way before opening a leveraged position.
Discover what leverage is and the associated risks of using it. Another way for traders to limit their exposure to risk is by having a trading plan in place. A trading plan can act as a blueprint to your trading and should take into account your available capital, time constraints and appetite for risk. A trading plan can help keep traders on task during their time on the markets. Find out more about making a trading plan. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument.
IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information.
Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. Although it is the world's biggest destination for investment and trade, engaging the forex does have a few drawbacks:. In many ways, the BTC to forex comparison is an apples to oranges analogy.
It is true that both involve the electronic trade of various currency forms. Yet, the size, structure and behaviour of each venue is very different. Of course, opportunity knows no bounds.
Many active traders have foregone the relative safety of the forex market for the potential of BTC and cryptocurrencies. Ultimately, the decision of whether or not to trade forex or BTC is dependent upon an individual's objectives, risk tolerance and resources. Demo Account: Although demo accounts attempt to replicate real markets, they operate in a simulated market environment.
As such, there are key differences that distinguish them from real accounts; including but not limited to, the lack of dependence on real-time market liquidity, a delay in pricing, and the availability of some products which may not be tradable on live accounts. There may be instances where margin requirements differ from those of live accounts as updates to demo accounts may not always coincide with those of real accounts.
Single Share prices are subject to a 15 minute delay. Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination.
Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication.
The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.
Please note our special trading hours over the festive period. A Brief History of Forex and Bitcoin The exchange of foreign currencies has been a pastime of traders since the widespread adoption of the gold standard during the late 19th century. Market Capitalisation: David Vs Goliath Before deciding to trade BTC or forex pairs, it is important to understand the contrast in size of each market.
However, this can afford active traders several advantages: Volatility : The limited BTC float creates ideal conditions for substantial daily trading ranges and spikes in volatility. Limited costs : Transaction costs are limited. If using a broker, fees may be assessed upon the purchase or sale of BTC.
If directly accessing the market, fees may be greatly reduced. Insulation : BTC is not subject to fluctuations created by conventional currency stimuli.
Geopolitical issues or domestic economic performance do not dictate value. Similar to forex currency pairs, BTC contract-for-difference CFD products typically offer low margin requirements and extensive account leverage.
In addition, BTC may be traded using margin on certain cryptocurrency or derivatives exchanges given specific trader requirements being met. Forex Pros And Cons Trading currencies on the forex furnishes participants with numerous advantages and disadvantages. The forex possesses several favourable characteristics that BTC does not: Liquidity : The size of the forex ensures a considerable depth of market facing a wide range of popular currency pairings. Diversity : Major, minor and exotic pairs are available for active trade.
Stability : Aside from extraordinary circumstances, foreign currency exchange rates are relatively stable. Fluctuations of large magnitudes are infrequent because of the volumes being traded. Leverage : Extensive leverage is available in the forex.