Connect with us

Blockchain

To Do Crypto or Forex Trading? Here are Major Differences, Pros and Cons for Each

Crypto and forex or foreign exchange trading are similar in multiple ways: they both involve trading and exchanging of currencies.

Republished by Plato

Published

on

Crypto and forex or foreign exchange trading are similar in multiple ways: they both involve trading and exchanging of currencies. If you were looking into which one to do, we got an entire list of things you can consider, the challenges, benefits and drawbacks for engaging in each. Forex is still a considerable choice for those willing to invest in regulated currencies, hedge against international currency and interest rate risk, to speculate on geopolitical events, and to diversify portfolios, and other styles. Managers, commercial banks, central banks, money managers and hedge funds are the main participants in this market. In contrast, there are a higher percentage of individuals who are doing cryptocurrency trading. Plus while forex — like stock — trading would be more viable for those looking for more stable and regulated assets, crypto is preferable for those who love to trade market volatility and where there is very few to no barriers of entry and low capital and investment requirements.

What differences would you encounter between crypto and Forex  trading?

The major difference between the two is that while crypto trading is relatively new, forex is well-established all with its brokers, middlemen and it has much better institutional adoption. Forex has so much liquidity, with trillions of USD traded in a day, when compared to crypto especially with the lesser popular coins, and there is also the issue of security of investments. Besides, forex is regulated industry and a mature market with brokers located and distributed in nearly every country. All these present major advantages for anyone wanting to venture into Forex trading. Probably the main drawback of Forex when compared to cryptocurrency trading is the cost with trading, with it getting more expensive to trade even before the trader can start getting profits. Forex requires substantial capital before you can get get started. Besides, Forex has low price variability or volatility for individual currencies, making it lesser attractive than crypto for those who want to trade violatility. Again when compared to cryptocurrencies, Forex’s large establishment world-over is its drawback in a way because individual traders are competing against well-established institutional Forex traders and banks. Although cryptocurrency market also has well invested institutional traders and high-frequency traders, the extent of competition is somehow limited compared to forex trading. In both cases though, one would require a high level of engagement, equity planning, proper risk management, perseverance and a strong desire to continuously learn. In both cases, educated investors have high chances of winning.

Here are some reasons you might want to engage in Forex trading compared to crypto trading

1. High liquidity

Trillions of money are now already invested in Forex trading and each of the pairs sold and bought on the forex market represents high liquidity, meaning the easy with which each single cryptocurrency can be traded for another, instantly. Whether you are trading local currencies in world’s most remote places or internationally-established currencies like Euro and USD, it is easy to find ready market and the high daily turnover means orders get filled instantly. Another advantage of high liquidity is that it reduces the role large traders play in the market. Large trades will not overly change the asking price of a given trade. In cryptocurrencies, lack of liquidity is common for many of the cryptocurrencies from the 5000+ cryptotokens and digital assets available. Large traders always lead price manipulations.

2. Security concerns: Forex is fully regulated

It’s a major problem with investing in any valuable asset, that there is risk of loss from manager or trader malpractice or errors caused by exchanges and platforms where money is kept. There are many cryptocurrency exchanges that have been hacked so far leading to loss of millions of dollars although again more has been lost in breaches related to Forex. While breaches on crypto stuff can be tracked, and a majority of platforms will refund money anyway, there would be lots of trouble because of the loose nature of regulating cryptocurrencies as a separate subject from assets and commodity law/regulation. In some cases, it is not certain that the cryptocurrency platform would even refund the money in case of a hack, internal errors or malpractice or other circumstance that lead to a loss. Apart from hacking practice and errors, lots of malpractices and scams in cryptocurrency may lead to loss of individual funds where the investor or trader does not do due diligence. Accompanied with the nature of blockchain technology that offer no method of recourse or reversal of transactions. In comparison, Forex transactions are governed by regulations and some level of protection as a requirement. Brokerage accounts also are insured by governments in the event of a theft or fraud. For these reasons, Forex transactions would appear to be secure and safer for those traders prefering a regulated investing environment. The fact that it is regulated explains the so-seemingly better trading conditions for forex because there are clearer guidelines on how to proceed with all nature of transactions.

3. What influences prices? more stability for Forex

The exchange rate of currency pairs play to economic development, political uncertainty, fiscal policy, central banks’ interest rate decisions, or even weather factors. Trading systems that deal with forex trading also provide good forex signals you can rely on to trade profitably.

4. Market capitalization is huge in Forex markets

Market capitalization being huge means there is greater liquidity, depth and stability, and this applies either in BTC or Forex transactions. Forex is far the largest marketplace in the world by market capitalization and the trading volume is in the tune of $5.1 trillion per day compared to $84 billion for equities worldwide. The high volume in Forex trading is attributed to the high public interest facing the seven major global currencies. While volatility may be more preferable for those trading volatility, relative pricing stability ensures that people who are trading something else aren’t losing too much of their investments. As such, they are able to remain in the market for longer. The United States Dollar is largest traded in volumes at the tune of 89%, Euro 31%, Japanese yen 22%, British pound 10%, Australian dollar 7%, Canadian dollar 5%, and Swiss franc 5%.

5. Extensive leverage

Like there is in cryptocurrencies, there is considerable leverage in stock ranging from 50:1 up to 100:1 margins. Same applies in cryptocurrency trading.

Here are some reasons you might want to engage in trading cryptocurrencies

1. High differences in exchange rates or price differences between crypto

Because there is high variability in cryptocurrency prices with those prices changing quickly every other minute and second of the day, crypto trading is now a major attraction for traders who are trading volatility. Huge volatility for traders who trade volatility means it is possible to buy low in the morning and sell high a few hours later. For instance, if you were trading stock markets, you could make a 5-15% ROI while Bitcoin would yield 12 months ago would yield approximately a 144% return. High volatility in crypto markets explains the gaps and slippages which are rare in forex trading except for those trading exotic currency pairs at low-quality brokers. The high volatility may present a problem for some traders, it’s true. However, as prices get influenced by day-to-day and minute-by-minute happenings such as news and events that are beyond individual traders’ control. In fact, part of the problem in this regard is manipulation because large institutions and companies can manipulate easily by way of propaganda, ad payments or through news outlets since they have huge following and given the low market cap for majority of crypto. With cryptocurrencies, however, we have quicker and more dramatic changes in prices which is influenced by things like news and events. Although volatility is high in cryptocurrencies, large coins do well and the volatility was still decreasing. In deed, over the years, Bitcoin, for instance, has seen less dramatic volatility shifts with sometimes being more synonymous with traditional currencies. This is even as more exchange continue to witness deeper liquidity, more people understand Bitcoin pretty well, and after increase in the overall confidence in long term viability of network without panic-induced buying and selling.

2. Lower barriers to entry

Cryptocurrencies are not just easy to buy by individual traders but also do not require registering with brokers as would Forex trading. Plus many online platforms have less to no requirement for identification because crypto is strong case for remaining anonymous on the internet. The reason BTC and crypto investments and trading have low cost and barrier of entry is because there are no intermediaries in the classic sense as in the case in foreign exchange markets. In cryptocurrencies, it is easy to enter the market with lesser than $50. You can then take advantage of higher volatility in crypto than there is in stock or Forex markets. This provides more opportunity to earn more profits. In stock and forex trading, companies that offer trading services require a great deal of information and sometimes even a declaration of “professional investor” status. This adds more costs and delay. Beginners in both cases would need to spend some time to understand the art. However, it is easier for a beginner to learn cryptocurrency trading from scratch before they can get started and earn some profits. Paper trading is also possible in cryptocurrency trading as much as in Forex trading for those trying to learn to trade. In comparison, there is a higher learning curve in stock and forex trading although forex signals can help reduce that learning curve than when you do analyses yourself. With stock and Forex trading, there also will be lots of paperwork and associated costs before you can start trading. Additionally, making the first profit is also going to be very difficult in crypto trading.

3. Lots of currencies and pairs to trade in

There are now more than 5000 cryptocurrencies and altcoins and digital assets. This presents one advantage for crypto traders; they are are able to choose from a variety of tokens and crypto for which to trade against each other. So if it’s a dark day for Bitcoin, one might check if there is relieve in Ethereum or some other low cap coin. Diversification is as real in crypto trading as is in stock or in Forex markets. It depends on one’s ability to build a workable and beneficial crypto portfolio.

4. High leverages

Like is the case with Forex trading, one is able to trade on leverage means they do not need an instantly large amount of crypto to be able to eye huge profits on a trade or several trades. In crypto as much as Forex trading, traders are able to invest a little amount of capital and harvest more profits than they should have with disposable capital because what leverage does is to loan out money to the trader to buy more or enter more (or larger) positions. Forex also does have leverage and leverage also means that traders can lose big if markets are moving against their bet.

5. Available 24/7

Without centralized governance of the market, and with most of transactions taking place directly between individuals, crypto is traded 24/7 without market closures. Even crypto exchanges do not have closing times. This is compared to stock or other markets than do not run on weekends or holidays. Forex market, for instance, is available 24/5

6. Availability of tools for trading and investing

In both cryptocurrencies and Forex trading, there are so many external tools that can aid traders in the making of more and more profits as they advance their art. Probably, there are more tools, including advanced tools, for those who want to start trading forex than there are for those willing to start trading crypto. However, it is harder for individuals to recognize, analyze, and capitalize on trends in the greater stock and Forex market. This is not so with cryptocurrencies where prices increase and decrease in a much more tied version to one another and related to each other. Thus, in cryptocurrencies, experienced traders can effectively predict the movements in the market but with stocks and Forex, it may be difficult to predict the larger issues that move markets. What it means is that although it is possible to do analyses to project crypto prices, it is harder to accomplish that it is in cryptocurrencies.

Source: https://www.cryptomorrow.com/2020/02/25/crypto-or-forex-trading/

Blockchain

Massive Bearish Divergence Hints At First Major Chainlink Corrective Phase

Republished by Plato

Published

on

Chainlink was among the first cryptocurrency to set a new all-time high in 2020, but given its absence during the 2017 peak was facing different circumstances and no overhead resistance. The » Read more

” href=”https://www.newsbtc.com/dictionary/altcoin/” data-wpel-link=”internal”>altcoin was nearly unaffected entirely by the » Read more

” href=”https://www.newsbtc.com/dictionary/bear/” data-wpel-link=”internal”>bear market over the last couple of years, breaking record after record.

However, a massive bearish divergence has formed as the unstoppable cryptocurrency touches an ascending trendline for the third time. Could this be the start of the » Read more

” href=”https://www.newsbtc.com/dictionary/altcoin/” data-wpel-link=”internal”>altcoin’s first extended » Read more

” href=”https://www.newsbtc.com/dictionary/bear/” data-wpel-link=”internal”>bear phase? Or are bulls preparing a much stronger push to finally blast through the long-term trendline?

Chainlink At Risk Of First Major Corrective Phase, According To » Read more

” href=”https://www.newsbtc.com/dictionary/bear/” data-wpel-link=”internal”>Bear Div

In 2017, Bitcoin’s meteoric rise and the explosion of ICOs built on Ethereum put the cryptocurrency asset class on the map. But after a storm of exuberance and parabolic price action, the bubble burst and these assets came crashing down by as much as 90% or more in many cases.

Even the crypto asset with the most longevity, Bitcoin, fell a full 84% from high to low, resulting in a three year » Read more

” href=”https://www.newsbtc.com/dictionary/bear/” data-wpel-link=”internal”>bear market. During that time, however, Chainlink made its debut in the crypto space, and its been on an unstoppable uptrend ever since.

Related Reading | Analyst: After A 50% Retrace Against Bitcoin, Chainlink Is “Ready” To Soar

The » Read more

” href=”https://www.newsbtc.com/dictionary/altcoin/” data-wpel-link=”internal”>altcoin rose from nearly worthless to over $25 recently at its 2021 peak. Chainlink went from being born during a » Read more

” href=”https://www.newsbtc.com/dictionary/bear/” data-wpel-link=”internal”>bear market, to hitting all-time highs left and right even before a bull market was confirmed.

Since things turned bullish, even Chainlink joined in Bitcoin and Ethereum and set yet another record peak. The entire market has once again turned back down, but the soaring » Read more

” href=”https://www.newsbtc.com/dictionary/altcoin/” data-wpel-link=”internal”>altcoin remains near 2021 highs.

Bearish Divergence, Or Are Bulls Baiting For The Next Move Up?

The recent push to $25 per token, has resulted in a massive bearish divergence on the weekly Relative Strength Index, spanning across the current peak and the 2020 high of $20, according to one crypto trader.

Coinciding with the bearish technical signal, is a more three-year long trendline that has acted as the top to every major rally. The chart below shows the long-term trendline on the LINKUSDT trading pair on Binance more clearly.

chainlink linkusdt bear div

A massive bearish divergence spans across two years of LINKUSDT price action  | Source:  LINKUSDT on TradingView.com

Bearish divergences appear when price action sets a higher high, but a technical indicator on the same timeframe chart makes a lower low. It often suggests that although prices are reaching new highs, the underlying buying pressure is lower than during the first peak.

The weakness results in bears taking over, and forcing prices lower. Bearish divergences often appear at the top of a trend, but are difficult to act on.

Related Reading | Altcoin Expert: Buy Crypto That Holds Up During Bitcoin Breakdown

Bearish divergences are only confirmed once price action has turned down. The lack of a higher high on a technical indicator could merely be due to the fact the bullish move is only yet just beginning. Taking a position in a long up-trending » Read more

” href=”https://www.newsbtc.com/dictionary/altcoin/” data-wpel-link=”internal”>altcoin due to a bearish divergence could lead to any missing out on any additional legs up that might follow.

Given Chainlink’s long-term momentum, the bearish divergence – if invalidated – could supply the momentum needed for a much stronger push higher.

Featured image from Deposit Photos, Charts from TradingView.com

Source: https://www.newsbtc.com/analysis/link/massive-bearish-divergence-hints-at-first-major-chainlink-corrective-phase/

Continue Reading

Blockchain

3 reasons why Ethereum price is still on track to top $2,000

Republished by Plato

Published

on

After dropping 27% over three days, Ether (ETH) price finally reached a bottom at $1,040 on Jan. 22. 

The sharp correction liquidated $600 billion worth of future contracts but interestingly, Ether price rebounded to a new all-time high even as Bitcoin price continues to trade in a slight downtrend.

According to Cointelegraph, the increasing TVL and transaction volumes of the decentralized finance sector are behind Ether’s impressive surge.

ETH/USD 4-hour chart. Source: TradingView

To determine whether the recent pump reflects a potential local top, we’ll take a closer look at on-chain flows and derivatives data.

Exchange withdrawals point to whale accumulation

Increasing withdrawals from exchanges can be caused by multiple factors, including staking, yield farming, and buyers sending coins to cold storage. Usually, a steady flow of net deposits indicate a willingness to sell in the short-term. On the other hand, net withdrawals are generally related to periods of whale accumulation.

ETH held in exchange wallets. Source: Cryptoquant.com

As the above chart shows, on Jan. 23, centralized exchanges recently reached their lowest Ether reserve levels since November 2018.

Although there is some discussion whether part of this Ether exodus is an internal transfer between Bitfinex cold wallets, there has been a clear net withdrawal trend over the past month. Despite these ‘rumors’, the data points towards accumulation.

This data also coincides with the DeFi’s total value locked (TVL) reaching a $26 billion all-time high and signals investors chose to take advantage of the lucrative yield opportunities that exist outside of centralized exchanges.

Futures were overbought

By measuring the expense gap between futures and the regular spot market, a trader can gauge the level of bullishness in the market.

The 3-month futures should usually trade with a 6% to 20% annualized premium (basis) versus regular spot exchanges. Whenever this indicator fades or turns negative, this is an alarming red flag. This situation is known as backwardation and indicates that the market is turning bearish.

On the other hand, a sustainable basis above 20% signals excessive leverage from buyers, creating the potential for massive liquidations and eventual market crashes.

March 2021 ETH futures premium. Source: NYDIG Digital Assets Data

The above chart shows that the premium peaked at 6.5% on Jan. 19, equal to a 38% annualized rate. This level is considered extremely overbought, as traders need an even higher price increase ahead of expiration to profit from it.

Overbought derivatives levels should be considered a yellow flag, although maintaining them for short periods is normal. Traders might momentarily exceed their regular leverage during the rally and later purchase the underlying asset (Ether) to adjust the risk.

One way or another, the market adjusted itself during the Ether price crash, and the futures premium currently stands at a healthy 4.5% level, or 28% annualized.

Spot volume remains strong and traders bought the dip

In addition to monitoring futures contracts, profitable traders also track volume in the spot market. Typically, low volumes indicate a lack of confidence. Therefore significant price increases should be accompanied by robust trading activity.

ETH aggregate spot exchanges volumes. Source: Coinalyze.net

Over the past week, Ether has averaged $6.1 billion in daily volume, and while this figure is far from the $12.3 billion all-time high seen on Jan. 11, it is still 240% higher than December’s. Therefore, the activity supporting the recent $1,477 all-time high is a positive indicator.

Exchange-provided data highlights traders’ long-to-short net positioning. By analyzing every client’s position on the spot, perpetual and futures contracts, one can obtain a clearer view of whether professional traders are leaning bullish or bearish.

With this said, there are occasional discrepancies in the methodologies between different exchanges so viewers should monitor changes instead of absolute figures.

Exchanges top traders ETH long-to-short ratio. Source: Bybt.com

The top traders index at Binance and Huobi have held roughly the same Ether position over the past couple of days. Huobi’s average over the past 30 days has averaged a 0.83 long-to-short ratio while at Binance traders held a 0.94 average. The current reading at 0.85 indicates a slight negative sentiment.

OKEx stands out as the top traders long-to-short ratio peaked at 2.0, strongly favoring longs in the early hours of Jan. 22, but it decreased until Jan. 24 and finally bottomed at 1.05. The strong net selling trend was reverted today as traders bought the dip and the indicator flipped to 1.17 in favor of longs.

One should keep in mind that arbitrage desks and market makers encompass a vast portion of the exchanges’ top traders metric. The unusually high futures premium would incentivize those clients to create short positions in futures contracts while simultaneously buying Ether spot positions.

Considering Ether’s on-chain data indicating whales hoarding, along with the healthy futures contracts premium, the market structure seems reliable.

The fact that top traders at OKEx also bought today’s dip is further indication that the rally should see continuation.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

Source: https://cointelegraph.com/news/3-reasons-why-ethereum-price-is-still-on-track-to-top-2-000

Continue Reading

Blockchain

Bank Of Singapore: Bitcoin Could Succeed As A Store Of Value

Republished by Plato

Published

on

The Singaporean private banking arm of OCBC Bank has dismissed the chances of cryptocurrencies eventually replacing fiat currencies as a medium of exchange. However, the large institution believes that BTC and other altcoins can replace gold in terms of serving as a store of value.

Cryptocurrencies: Store Of Value; Not Medium Of Exchange

Ever since the introduction of Bitcoin in the late 2000s, people have wondered if the cryptocurrency could indeed live up to the potential of operating as an electronic peer-to-peer cash system, as intended by the anonymous creator – Satoshi Nakamoto.

Doubters have breached the infamous volatility as a significant obstacle in BTC’s path. It seems that the Bank of Singapore agrees with this narrative, according to recent coverage.

Chief economist Mansoor Mohi-uddin used the movements from the past year, where BTC went from a low of $4,000 during the mid-March liquidity crisis to a new all-time high above $40,000 months later, to exemplify it and dismiss this narrative.

However, bitcoin and other altcoins can have a role as a digital store of value if they manage to address several potential issues. Apart from the aforementioned price fluctuations, those include high liquidity and safe custodians.

“First, investors need trustworthy institutions to be able to hold digital currencies securely. Second, liquidity needs to improve significantly to reduce volatility to manageable levels.” – explained the economist.

Additionally, the crypto ecosystem requires more regulations from world watchdogs to reduce their alleged involvement in criminal activities. However, Mohi-uddin warned that if governments felt threatened by the existence of particular digital assets, they could fight back, which is the case with the growing trend of central bank digital currencies.

Institutional Adoption Highlights BTC’s Store Of Value Qualities

The bank’s economist explained that the growing appetite from institutional investors had supported the belief that bitcoin should be used as a store of value instead of a medium of exchange. Furthermore, some of them even outlined the idea that BTC could replace gold or it’s better than the precious metal in a way.

SkyBridge Capital co-founder Anthony Scaramucci recently asserted that the largest cryptocurrency is easier to store, harder to steal, more portable, and ultimately, better than gold.

CIO at the Wall Street behemoth BlackRock, Rick Rieder, predicted that BTC could take some of the market share of the yellow metal and eventually even replace it.

Similarly, JPMorgan’s analysis concluded that the cryptocurrency has started to garner some of gold’s market share, which could harm the bullion’s price in the long-run.

SPECIAL OFFER (Sponsored)
Binance Futures 50 USDT FREE Voucher: Use this link to register & get 10% off fees and 50 USDT when trading 500 USDT (limited offer).

PrimeXBT Special Offer: Use this link to register & enter CRYPTOPOTATO35 code to get 35% free bonus on any deposit up to 1 BTC.

You Might Also Like:


Source: https://cryptopotato.com/bank-of-singapore-bitcoin-could-succeed-as-a-store-of-value/

Continue Reading
Blockchain4 days ago

Litecoin, Dash, FTX Token Price Analysis: 21 January

Blockchain4 days ago

Bitcoin is an Unreliable Hedge During Market Upheavals: JP Morgan Analysts

Blockchain4 days ago

This early investor just sold his Ethereum stash he hodled for five years

Blockchain4 days ago

Komainu to store crypto confiscated by UK law enforcement

Blockchain4 days ago

Aave Crosses into DeFi Layer-2 with Matic Bridge

Blockchain4 days ago

90% of these altcoins outperformed Bitcoin recently

Blockchain4 days ago

Largest Russian Bank Seeks Permission to Launch Blockchain

Blockchain4 days ago

Litecoin Price Analysis: 22 January

Blockchain4 days ago

Bitcoin Dominance Plummets while Altcoins Outperform

Blockchain4 days ago

Stellar Lumens, Steem, Maker Price Analysis: 22 January

Blockchain4 days ago

JPMorgan Strategists Explain Why Bitcoin is Currently the “Least Reliable Market Hedge” as BTC Price Drops

Blockchain4 days ago

Blockchain and Crypto to experience accelerated growth in 2021 – Ripple

Blockchain4 days ago

Bitcoin Briefly Drops Below $30,000 Before Reclaiming

Blockchain4 days ago

Alpha Finance (ALPHA) Climbs to All-Time High — Targetting $1

Blockchain4 days ago

VanEck files for a ‘Digital Asset ETF’ with the SEC

Blockchain4 days ago

Kyber 3.0 Will Introduce Dynamic Market Making

Blockchain4 days ago

eToro Convinced That More Institutions Will Troop In When Crypto Hits $2 Trillion. Here’s Why

Blockchain4 days ago

Janet Yellen Writes: It’s ‘Important We Consider the Benefits of Cryptocurrencies’

Blockchain4 days ago

Why the Asian session holds the key to Bitcoin’s price drop

Blockchain4 days ago

Should You Buy The Bitcoin Dip? Analysts Weigh In On Bear Market

Trending