Fiat Trading VS Crypto Trading
Introduction
It's not a secret that virtual currency has turned the world of finance upside down. Will crypto trading replace fiat trading in the near future? What are their similarities and differences? Let's figure it out together.
A Teensy Bit of Backstory
Forex trading dates back to the 19th century. In those days, the gold standard was widely used. Because of the relative ease of trading, Forex has gained a wide following. Another major factor that affected the popularity was the spread of electronic transactions. This is what led to the emergence of nowadays trading platforms.
The key idea of Forex trading is to sell and buy currencies of different countries. Forex traders try to earn money by playing on constantly changing exchange rates.
Everything changed when bitcoin took the world of finance by storm in 2009. According to crypto enthusiasts, decentralized superorganism should eventually become the "new gold".
Crypto trading involves making a profit by tracking the rates of cryptocurrencies. Some traders use signals to decide when to hold and when to sell.
But Forex trading and crypto trading are not the same thing, and if you want to succeed in each of them, you first need to understand how they differ.
The Main Differences
Liquidity
When it comes to liquidity, fiat trading is winning for now. In general, the Forex market is older and apparently involves much more players than the crypto market. In addition, traditional currency is printed and backed by central banks. Therefore, the supply is almost unlimited and the liquidity is high. Cryptocurrencies are built on cryptography. They are not secured by people or by trust but by math. The majority of coins has limitations that need to be taken into account. Therefore, their liquidity is lower.
Inflation
This is a huge common problem for Forex traders. When it comes to crypto, the likelihood of meeting the inflation is quite low. On the other hand, general price inflation is something that can happen both in crypto and Forex trading. Features that influence it are political instability, public expenditure, and some other economic mechanisms. Crypto trading is subject to public opinion, platform adoption, and other speculative factors.
Strict Rules
Forex trading is a highly regulated system. There are rules and guidelines that determine what is acceptable and what is not. In crypto trading, there are not yet so many rules. While the lack of control can bring greater returns, it also means that there is a higher risk of losing your investment.
Crypto is backed by nothing (only hopes and expectations). Almost all stocks are backed by companies that generate some income. The same cannot be said about the magic Internet money and tokens, since most of them are created "out of thin air".
Big Risks
If scammers steal your private keys, you can lose your money forever. And since cryptocurrency transactions are irreversible, there is nothing you can do. Of course, stocks are not immune to fraud and phishing either. However, they can't just disappear.
Price Policy
With digital currencies, you can find the best offer, but exchanges do not have legal obligations under the price. Fiat trading is regulated by the law on investor protection in almost all developed countries. Crypto trading is not regulated. A great many users are free to operate from the jurisdiction of any country.
Final words
Crypto trading is not only a potentially lucrative business but also represents high risks. However, it's not as bad as you think. Nothing's impossible when we're a team. Equite is always ready to support users and help them understand all the nuances of trading. Don't let problems get in the way of your dream!
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