A Lot of people entering the financial trading world get confused between crypto vs forex trading.
It’s really a tough choice to decide which is the best because both have pros and cons, and the ultimate choice depends on your risk tolerance.
I trade both crypto and forex, which means I have first-hand experience on both sides.
If you’re a beginner, I recommend you stick to one of them. Please don’t trade both to avoid frustration.
In this article, I will share the pros and cons of crypto and forex trading and give my recommendation at the end.
If you’re ready, let’s dive in
Crypto Vs Forex Trading: Which Is Better?
Let’s explore the advantages and disadvantages of both crypto and forex trading. Each has its own unique strengths, which influence why traders may choose one over the other.
Crypto Trading Advantages
1. High Return On Investment
It’s very common for a cryptocurrency to increase 100% to 500% in a single day.
That kind of volatility is what attracted many traders to the crypto industry.
With crypto trading, you can make a lot of money in a short time.
All you have to do is buy crypto with great potential earlier than others, and you could make insane profits.
Like Solana (SOL), which increased over 10x within a year, you can only find such astronomical growth in crypto.
2. The Market Is Open 24/7
It’s what really attracted me to crypto trading. The fact that the market is always open 24/7 meant there was no limit to how much you could make as a trader.
The crypto market never sleeps.
This continuous market availability allows traders to react to news as it happens, potentially capitalizing on price movements at any time.
It’s exciting to know that anytime you want to trade, the market is always available.
3. Easy To Start With Little Capital
You can easily start crypto trading with as little as $10.
Some exchanges allow you to trade without ID verification, meaning the barrier to start crypto trading is very low, you can literally start today.
Such ease of starting is why some traders prefer crypto.
4. Multiple Markets
In crypto, you can either trade spot or futures, meaning you have more flexibility.
You can choose to avoid futures trading due to its high risk and trade only spot markets.
But wait?
What Is Spot Trading?
Spot trading involves the immediate purchase of a cryptocurrency at the current market price. The transaction is settled “on the spot.”
Spot trading is straightforward, and the key advantage is there is no leverage, which can significantly increase your risk.
What Is Futures Trading?
Futures trading involve a contractual agreement to buy or sell an asset at a predetermined price on a specified date.
Unlike spot, futures trading involves the use of leverage.
Leverage allows you to control a larger position with a smaller amount of capital.
It works by borrowing funds from the exchange to increase your exposure to a particular cryptocurrency, amplifying both potential gains and losses.
5. Vast Number Of Crypto To Trade
There are over 2.2 million cryptos on CoinMarketCap.
That’s a lot for someone who loves variety and wants to explore different opportunities in the ever-evolving world of digital assets.
With such a massive selection, traders can dive into everything from established giants like Bitcoin and Ethereum to emerging meme tokens.
Whether you’re looking to diversify your portfolio, find hidden gems, or ride the waves of trending coins, the sheer abundance of options offers endless possibilities for every type of trader.
Cons Of Crypto Trading
6. High Level Of Manipulation
The crypto market is highly manipulated, and you could easily lose your funds if you’re not careful.
That’s why it’s important always to use stop loss.
The market can experience unexpected sell off by whales to create fear and panic among traders.
Whales could also trigger unusual buying activity to trick other traders into opening a long position.
Sometimes, there could also be a deliberate spread of false information to manipulate the price of a cryptocurrency.
7. Ease Of Getting Scammed
It’s so easy to get scammed in the crypto space.
Many of the newly created tokens are scams wanting to take your money
There are so many ways to get scammed in crypto trading. I would mention a few below:
Pump and Dump: A scheme where the price of a cryptocurrency is artificially inflated, then sold off quickly for profit, causing the price to crash.
Rugpull: A scam where project developers withdraw all funds, leaving investors with worthless tokens.
Spoofing: A tactic where fake orders are placed to manipulate the price of a cryptocurrency, then canceled before execution.
In crypto trading, you need to conduct a lot of research to avoid getting scammed.
When I started crypto trading, I was also a victim of buying scam tokens.
In 2018, I bought helbiz (HBZ), believing it was a token with great potential, but I was wrong.
The project was a scam, and I lost all my money.
8. Volatile Assets
The crypto market is very volatile. You can be in profit one minute and be in huge loss the next.
That’s why you must protect your capital.
In crypto trading, prices can move very fast in a short time, and your losses can also increase if you don’t use stop loss.
The same way prices can increase by 100% is the same way they can decrease by 90% in one day.
Like LUNA, that lost 97% of it’s value in one day, and a lot of people lost their money.
9. Lack Of Regulation
The crypto industry doesn’t have any official regulation.
There are no penalties for doing anything wrong.
You can create a token, sell it to unsuspecting traders, take the money and disappear into thin air, and nothing would happen.
The crypto world is that wild.
There’s nobody held responsible if a crypto project fails and people lose money or punishment for insider trading and other manipulative tactics.
10. High Security Risk
The crypto world is subject to high levels of security risks because of its decentralized nature.
Crypto exchanges are often the target of sophisticated cyber-attacks, including hacking, phishing, and fraudulent schemes.
Such as the Mt. Gox exchange hack of 2014 and the Wazir hack of 2024
Your funds could get stolen if the exchange where you trade is hacked.
Forex Trading Advantages
11. Less Manipulation
The forex industry generally has less manipulation because it’s more established and has solid regulation.
It’s difficult to get scammed in forex.
Since most of the traded pairs are currencies of nations or real-world assets like gold, it’s difficult to manipulate.
12. Lower Volatility
Forex pairs are typically less volatile than crypto.
Volatility can only happen if a nation experiences significant bad news or if the economy is heading in a negative direction.
It’s rare to witness extreme volatility in forex trading.
13. High Liquidity
The forex industry has approximately 6.6 trillion dollars flowing in on a daily basis, which brings liquidity to the market.
What Is Liquidity?
Liquidity refers to how easily and quickly a currency pair can be bought and sold without causing a significant change in its exchange rate.
High liquidity means that there are many buyers and sellers in the market.
14. Availability Of Historical Data
One of the key advantages of the forex industry is the availability of extensive market data, with records dating back to 1950.
This wealth of historical information is invaluable for traders who rely on long-term analysis to understand market trends, cycles, and behavior.
In contrast, the cryptocurrency market, being relatively new, lacks such a deep reservoir of historical data, which can limit the ability to perform comprehensive historical analysis.
Forex traders can leverage decades of data to refine their strategies, identify patterns, and make more informed trading decisions.
This access to historical trends helps in back-testing trading systems, understanding market reactions to similar past events, and enhancing overall trading confidence.
Forex Trading Disadvantages
15. Market Hours
One aspect I don’t like about forex trading is the limited market hours. Unlike crypto, which trades 24/7, the forex market operates 24 hours a day but only for five days a week, excluding weekends.
Even during these five active days, the majority of the trading volume is concentrated in the London or New York sessions.
Outside of these times, the market is relatively slow, and it can take longer for your orders to be filled.
16. High Leverage
Forex offers leverage up to 1:1000, which I believe is too high for most traders.
While high leverage excites many, it’s also the quickest way to blow up an account.
Additionally, making significant profits in forex without using high leverage is challenging, as currency pairs are far less volatile than cryptocurrencies.
It’s rare to see a 3% price movement in forex within a day, so the only way to amplify potential profits is by using high leverage.
17. More Complex
Forex trading is generally more complex due to terminologies like lot sizes, pips, spreads, and base currency.
Concepts such as lot sizes and pips can often be confusing for beginners, as they require an understanding of how these factors influence trade size, profit, and loss.
In contrast, cryptocurrency trading tends to be more straightforward, with simpler calculations, making it easier for newcomers to grasp the basics quickly.
18. Few Trading Pairs
Forex offers fewer trading pairs compared to the vast array available in the crypto market, which can limit your options as a trader.
Moreover, some of these forex pairs have very low trading volumes, which can lead to higher costs when executing trades due to wider spreads.
If you choose to trade one of these low-volume pairs, you may find yourself paying more to enter or exit a position, making it less efficient and potentially less profitable.
Frequently Asked Questions
What Is Better: Forex Or Crypto?
It depends on your goals. Forex is more stable and regulated, ideal for consistent gains. Crypto is riskier but can offer higher rewards due to its volatility.
Is Forex Trading More Profitable Than Crypto?
Forex is generally more stable, offering steady profits. Crypto can be more profitable but comes with higher risks due to its volatility.
Is Forex or Crypto More Predictable?
Forex is more predictable with established patterns and economic indicators. Crypto is less predictable due to its volatility and diverse influencing factors.
