In this article, we will try to understand whether or not it is worth investing in these asset classes, which could be the most convenient, and what are the differences between the two worlds.
We will therefore discover together how to approach investing in Forex and Cryptocurrencies more consciously, and what you need to pay attention to when you think about trading these assets within the Nigerian space.
Differences between Forex and Cryptocurrencies
Many people believe that between Forex and Cryptocurrencies there are more points in common than those of difference. In reality, this is not the case. To find out, below we have focused only on the points of greatest divergence between these areas, and only and exclusively about of view of a trader.
1. What the prices depend on;
The first element that we can only underline is the fact that the prices of Forex and Cryptocurrencies depend on very different market movers. In other words, the determinants that you should take into consideration when evaluating how to invest in Forex and Crypto are very different, and you will not be able – therefore – to dynamically adapt your strategy if you believe you are using capital in them.
For example, it does not escape the fact that the market movers on Forex are much more defined and consolidated than those of virtual currencies. In particular, it is the monetary policies of central banks that have a heavy impact on prices, also considering that with them it is possible to modify the supply of money (think of the increase in rates).
Furthermore, traditional currencies are strongly linked to the economies to which they refer, both for technical reasons and for image issues (intuitively, currencies end up replicating the image of the country to which they refer).
As is evident to all investors, in the world of cryptocurrencies all this does not exist, given that digital currencies are unrelated to the fate of individual economies. There is therefore no monetary policy or any institution that can in any way decide their fate or – at least – influence their existence.
This does not mean, in turn, that there are no market movers capable of influencing digital currencies and their courses, but more simply that cryptocurrencies have very particular determinants, which are more difficult to interpret.
2. How volatile Forex and Cryptocurrencies are;
In this context, it should also be noted that Forex and Cryptocurrencies have two different levels of volatility. Traditional exchange rates (think of the euro-dollar exchange rate) change much less unpredictably than those of cryptocurrencies and, in any case, they always do so for interpretative elements that can be easily identified.
As for cryptocurrencies, however, their volatility is extremely high, and it is often not clear why their prices rise so quickly and collapse just as suddenly. This determines the birth and development of a market, the cryptocurrency one, which is highly volatile and is even much more so than equities.
This situation is a great advantage and a great risk for traders. Those who aim more at speculation will only appreciate such a feature, while those who fear risk more will look at it with greater skepticism.
3. How to Invest in Forex and Cryptocurrencies;
As for the points in common, it is easy to remember how it is now possible to invest in Forex and Cryptocurrencies with the same instruments: CFDs, contracts for difference.
Through the use of these financial instruments, it is, in fact, possible to take a position on the main currency and cryptocurrency exchanges with identical ease, using the professional platforms of the most well-known brokers, like FXTM, and OctaFX, for forex whilst Binance, and Coinbase serves for crypto trading.
If you are interested in finding out how it works, we advise you to open a demo account right away: it’s free, it’s without obligation, and will allow you to evaluate how to invest in cryptocurrencies and Forex without risking your capital. When you feel ready to invest for real money, you can then do it with a simple click!