Forex and Crypto have differences as investment and trading instruments. What are the differences and which is the best choice for future investors.
We discuss head to head between bitcoin cryptocurrencies and forex forex.
The difference between forex and crypto is in terms of digital assets and fundamentals. The price of forex is determined by the economy of a country, while the value of crypto is determined by the successful development of an ecosystem of projects built on the blockchain network.
Crypto is a digital asset that cannot be physically seen, everything is stored as code on the blockchain network. Meanwhile, forex currency has a physical form, it can be touched and held, although now it is also stored digitally.
In terms of investment period, forex trading is more short-term, with position closing within 1 day. While crypto and bitcoin are actually long-term investments because they are related to ecosystem development and project infrastructure on the blockchain network.
Forex and crypto have different features and characteristics. We need to understand the difference.
1. Return on Investment
Crypto promises a very large profit return. Just look at the increase in the price of Bitcoin in the last 10 years.
Bitcoin price rose thousands of percent. Likewise with other coins. Even alt coins, the term for coins outside of Bitcoin, can rise even higher.
Forex also provides returns that are far from small. In a day, currency exchange rate fluctuations can go up 1% to 2%, which means 30% a month.
However, if you are asked to compare, the potential return from trading in cryptocurrencies is higher than forex. The increase in crypto prices is greater than forex.
The following is an example of the increase in the price of Solana’s crypto asset in 2021. In just less than 1 year, the price has increased by thousands of percent.
High profit returns come with high risk. There is a price to pay.
The risk of playing in crypto is higher than forex. Although the risk of playing forex is also not low.
Price fluctuations can be seen from the development of Bitcoin prices. The ups and downs of the price are very high, which makes the risk big.
Causes of high risk in crypto:
First , this asset class is still very new and the opportunity for growth is still wide open.
Because it’s new, many investors don’t really understand how to evaluate this asset accurately. There are still many who suspect that the possibility of price fluctuations is large.
Second , regulation in crypto is still very limited. Even as a decentralized asset, cryptocurrencies do not want to be centrally regulated.
Because it is decentralized and less regulated, crypto investors have to take care of everything themselves. This is prone to abuse, especially for novice investors.
Third , crypto assets are very easy to create and market, which makes the potential for abuse very large, especially targeting the novice investor group. Especially in the midst of the hype about the promise of profit investing in crypto.
As a result, it is not uncommon for scam investments to occur in crypto. Investors’ money is lost due to rug pull events – failed projects and fraud.
The forex market has a market cap value many times over the crypto market. This shows the magnitude of transactions in the forex market.
Due to the large market cap, the liquidity in forex is also large. It’s easy to buy and sell in the forex market.
The market cap in cryptocurrencies is much smaller. This is natural because the adoption of crypto currency is still limited and the age is still young.
With a smaller market cap, liquidity in crypto robot tranding binance is not as good as in forex. The low liquidity is reflected in the volume of transactions per day which is still lower than forex trading.
The implication of low liquidity is that crypto prices can fluctuate greatly in a short period of time. In contrast to the forex market, forex prices do not fluctuate, unless there is news that affects the market.
Both forex and crypto are regulated in Indonesia by the same institution, namely CoFTRA. Both of these instruments are included in the realm of commodities.
Forex has long been regulated to be traded in Indonesia. In fact, forex has entered as one of the commodities on the futures exchange, together with other commodities such as gold, silver and others.
Crypto assets can be traded in Indonesia. CoFTRA has regulated that cryptocurrencies can be traded.
The buying and selling of cryptocurrencies, such as Bitcoin and other crypto coins, is legal.
The rules for buying and selling crypto coins as commodities are contained in:
Regulation of the Minister of Trade Number 99 of 2018 concerning General Policies for the Implementation of Crypto Asset Futures Trading and
Commodity Futures Trading Supervisory Agency Regulation Number 5 of 2019 concerning Technical Provisions for the Implementation of the Crypto Asset Physical Market on the Futures Exchange. This rule was signed on February 8, 2019.
However, crypto as a currency for a medium of exchange is prohibited in Indonesia. Anyone who uses cryptocurrencies as a medium of exchange will be penalized.
The official currency is Rupiah. This is strictly regulated by Bank Indonesia.
By regulation, CoFTRA continues to build a cryptocurrency ecosystem and infrastructure. A number of provisions were issued and a new institution was formed to facilitate secure crypto trading in Indonesia.
Importantly, even though it is legal, the CoFTRA Regulation stipulates that crypto assets that are legal and can be traded in Indonesia must meet the following requirements:
based on distributed ledger technology ;
utility crypto assets or
asset- backed crypto assets and
has a market capitalization value , is ranked in the top 500 crypto asset market capitalization, is entered in the transactions of the world’s largest crypto asset exchange, and has economic benefits.
5. How to Trade Buy and Sell
In forex because transactions do not occur on one exchange, but occur between investors and brokers, as a result, foreign exchange rates can differ from one broker to another.
In addition, the absence of an exchange party in forex makes the role of a broker very central. Only investors and brokers are involved in the transaction.
Therefore, investors must be absolutely sure that the broker used is trustworthy and legit. Not a fake broker.
The process of buying and selling Bitcoin is done through an exchange or exchange. The services on the Exchange are buying, selling, storing and transferring of crypto assets.
This exchange functions like a marketplace, a place that brings together buyers and sellers of crypto assets. Crypto asset transactions occur between members or merchant members of the exchange.
Exchange itself does not do buying and selling. Its role is only to be an intermediary and will collect a number of fees, such as fees for buying and selling and withdrawing money.
Each exchange will determine the types of crypto assets that can be traded on their marketplace. Each exchange has a different list of crypto assets.
The benefits of forex or forex are clear to facilitate trade between countries. The greater the value of world trade, the greater the forex trade.
Fluctuations in forex prices that go up and down create opportunities for speculation. There is an opportunity to profit from buying and selling foreign exchange.
Crypto has different benefits. And this is probably the most frequently asked question.
The problem with the payment system in today’s world is
it is a long process to send money between countries,
involvement of a 3rd party (bank, Visa/Mastercard) which adds to the fees,
there is no privacy for the sender and recipient of money.
In my experience, sending money from Indonesia to other countries costs at least $25 per transfer and takes 2 to 3 days for the money to reach the recipient’s account. It’s been expensive, it’s been a while.
Bitcoin and crypto are revolutionizing that allows people to send money directly to the recipient (peer to peer) without having to go through a 3rd party, at an affordable and fast cost (under 1 hour) and anonymous (cannot be traced who the sender and recipient are).
Standing on blockchain technology allows various parties to make bitcoin transactions – buy, store, send – without the need for 3rd party intervention. The transaction is very transparent because everyone can check on the Blockchain system the Bitcoin transaction process.
Because it is peer to peer, Bitcoin transactions are anonymous – it is impossible to know who made the transaction. This feature is important in the midst of privacy issues, excessive supervision by the state to the public.
7. Digital Assets
Well, this is the most obvious difference.
Crypto is a digital asset that does not have a physical form. Bitcoin and other crypto assets are stored as code on the blockchain network.
While forex is not a digital asset. We can physically hold and exchange between currencies.
8. Investment Period
Although many people trade short-term in cryptocurrencies to make quick profits, crypto assets are actually long-term investments. Why ? because the value of crypto is determined by the success of the project ecosystem built on the blockchain network of the currency.
To build a blockchain ecosystem takes time and process. Crypto adoption takes time.
So, investing in crypto is actually a long-term investment.
In contrast to forex trading which is more short-term. Within one day, forex investors usually close or close their positions.
Rarely, forex investors hold positions within a few days. Especially those who hold it monthly.