A Comparison of Cryptocurrency and Forex Trading in 2021

by Trading 101     Aug 02, 2021

The FX market and the cryptocurrency market are the two most talked-about financial markets in the world right now and for good reason. The main difference between the two markets is between the old and new ways of thinking about money. You may be confused about which market to choose when investing and there isn’t any single answer to that question.

The forex market is by far the largest financial market in the world. Here participants trade over-the-counter, which determines the exchange rates for currencies around the globe. Participants in this market are able to sell, buy, exchange and speculate on the currencies of different nations. The main participants of this market include investors, forex traders, retail forex dealers, hedge funds, investment management firms, central banks, commercial companies and other financial institutions.

The cryptocurrency market, on the other hand, involves the trading of cryptocurrencies, which are digital assets that employ cryptography for security. The currencies themselves do not possess any intrinsic value and are not redeemable for another community. Unlike the traditional forex market, cryptocurrencies are not issued by any central authority. They are primarily used to buy and sell goods and services, although a number of new use cases are on the rise.

Both the FX and the cryptocurrency market have their own sets of characteristics, benefits and weaknesses. It’s not really about the profit potential when comparing these two markets, but rather about volatility and liquidity.

Let’s take a look at the major differences between the two markets to understand which one is better from the investor perspective.

Cryptocurrency Trading vs. Forex Trading

The cryptocurrency and FX market differ in respect to market size, volatility, liquidity and anonymity.

  • Anonymity

In the FX market, transactions are tightly regulated by a network of financial professionals and forex brokers collectively known as the interbank market. The interbank market has introduced the “know your customer” or KYC standard for better transparency and accountability since 2014. Forex traders are now required to divulge personal information to access the services of an exchange. Additionally, some companies like EagleFX are starting to mirror crypto’s anonymous design to ignore KYC rules.

Cryptocurrencies on the other hand first received mainstream attention because of their inherent ability to facilitate anonymous transactions. This is largely due to the nature of cryptocurrencies and blockchain technology, which does not require the assistance of a centralized, third-party intermediary to function. This is one of the reasons why many national governments around the world have started targeting cryptocurrencies such as Bitcoin and Ethereum.

However, some of the smaller capped cryptocurrencies such as Zcash, Verge and Monero still retain this ability.

  • The Size of the Markets

The size of the cryptocurrency market is significantly small compared to the global FX market. The larger size of the FX market also provides different levels of liquidity and volatility for respective currency pairs. This allows new participants to trade pairs from stable economies which have more protection from large losses, before engaging in more speculative trades.

The currency pairs that participants see when they read opinion pieces by industry experts may seem simple but this isn’t the case. Owing to the massive size of the market, novice traders can start comfortably with simple FX pairs while they cultivate their forex trading skills. Once they are initiated in the various forex strategies and techniques, they can move on to other pairs and expand their portfolio.

  • Liquidity and Volatility

As the cryptocurrency market is smaller in comparison to the forex market, smaller amounts of money can move cryptocurrencies more than FX pairs. For instance, we can expect the prices of almost all cryptocurrencies to double if another $256 billion (approx.) was injected into the crypto market. However, the same amount represents only a small percentage change in the forex market. This makes the cryptocurrency market more volatile from the trader’s point of view.

Keep in mind that higher volatility equals more risk. In other words, there is a chance of earning profits exponentially with the risk of financially crippling losses hanging over. As more participants are naturally attracted to a smoother marketplace, higher volatility means less liquidity which results in ease of trading. Because of the high liquidity and lower volatility, the FX market is in a better position to absorb economic shocks. The average participant will be benefitted from this as currencies remain relatively stable even during tough economic periods.

Forex vs. Cryptocurrencies: Which One Should I Go For?

Ultimately the decision rests on the tastes and preferences of the trader as well as his/her knowledge and experience. While both markets share some common characteristics, their risk-reward dynamics are hugely different. As a trader, you should look at certain aspects of both markets before making a final decision. Some of these aspects are mentioned in the table below.

Salient Features



  • Important Price Drivers

The cryptocurrency market is primarily driven by microeconomic factors, investor sentiment, news related to crypto-regulations and the popularity of a particular crypto.

The Forex market is primarily driven by macroeconomic factors such as political and financial news.

  • Trends

Exponential trends are more common in the cryptocurrency market.

Exponential trends are less common in the FX market.

  • Leverage and volatility

The crypto market possesses higher volatility and low leverage use.

The FX market possesses lower volatility and higher leverage use.

  • Accessibility

Participants can access cryptocurrencies either through exchanges, through wallets or via mining.

Almost all major online forex brokers offer at least all the major forex pairs.

  • Market Hours

The crypto market is 24/7 in nature and does not have any specific market hours.

The Forex market only works on weekdays.

  • Cost of trading

The cost of trading in cryptocurrencies is higher.

The cost of trading in the FX market is lower.


Trading on the FX and cryptocurrency market are two different experiences although both the markets have some things in common. You can always choose reliable online brokers that offer both forex and cryptocurrency trading, helping you to diversify your portfolio and take part in both markets.

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