Since the 1990s, regular people have had access to financial instruments to trade and thereby giving them some control of their own financial future. That trading was reserved almost solely and specifically for the regular stock markets – this is not the case anymore.
All over the world we now have access to instruments that were previously only able to be touched by the financial elites. There are limitless amounts of things to access: futures, options, normal equity markets, CFDs (contracts for difference), forex and cryptocurrencies (Bitcoin).
When forex was introduced as a derivative to trade, it was met with a lot of resistance. Experts, looking out for everyone’s own good, said that the public should not trade forex. ‘’It’s a scam’’. ‘’It’s rigged’’. ‘’It’s over-leveraged’’. In fact, we can still hear or read stories about how forex is not a safe trading vehicle and a scam (most of those complaints are regarding shady and unscrupulous brokers).
$5.3 trillion dollars in forex traded daily is not a scam. The newest instrument to trade, and perhaps the most confusing to understand and comprehend, is Bitcoin.
If financial markets and human behavior are examples of how natural patterns repeat themselves over time, then the criticisms of Bitcoin compared to forex are another fantastic example.
If you are a current trader, then you might laugh at how much we hear the same criticisms of forex when it became mainstream as we do for Bitcoin. And what are those criticisms? It’s too new, it’s unsafe, it’s a scam, it’s rigged. But we know that not to be true.
Forex and Bitcoin are probably the most closely related trading vessels we have access to. They are both ‘new’. But is one better than the other? Is one safer than the other? Is one better to trade than the other? Let’s look.
Even if you were to buy bitcoin low and sell high, you still might not see the big payday you’re hoping for. “You try to sell it, and by the time the order goes through, the price may have dropped,” said Matthew Elbeck, a professor of marketing at Troy University. “It’s really, really not worth it for the ordinary consumer.”
Take a look at those two above charts. Can you tell which one is a forex pair or Bitcoin? You can’t. If we were to put on a price scale you could tell, but with just naked candlesticks we can see that there is absolutely no difference.
Even in this short time span, we can observe the same patterns that are inherent in any market. If you’re curious as to which is the forex pair and which is Bitcoin, the top chart is the EURJPY forex pair on a 16-minute chart and the bottom chart is the BTCUSD cryptocurrency pair, also on a 16-minute chart.
Common indicators like volume, moving averages, oscillators, volatility indicators work as well in forex as they do for trading Bitcoin and its various pairs. See below.
Jesse Livermore was a trader during the famous stock market crashes of 1907 and 1929 – he was quite correct when he said, “There is nothing new on Wall Street or in stock speculation. What has happened will happen again and again and again. This is because human nature does not change, and it is human emotion, solidly built into human nature, that always gets in the way of human intelligence. Of this I am sure.”
Another and probably more important attribute from a purely idealistic standpoint is that both forex and Bitcoin are not tied to an ‘official’ exchange. If you want to trade stocks, you have to go through the ASX, NYSE, DAX, etc.
Do you want to trade futures? You have to go through the CBOT, CME, etc. The ‘privilege’ of trading these instruments is that you need significant capital to open an account and maintain that initial capital balance. Want to trade the ES (S&P E-mini futures contract)? You better make sure you have more than the minimum of $5,000 in your account. You go below $5,000 in your account, no more trading futures for you!
Trading Forex and Bitcoin generally have little requirement to start trading and opening an account (exchanges for Bitcoin).
Ray Dalio Calls Bitcoin a Bubble and a Highly Speculative Market. Ray Dalio, who heads the $160 billion Bridgewater Associates, says bitcoin is a bubble.
“It’s very much speculative. People are thinking, ‘Can I sell it at a higher price,’ so it’s a bubble,” he said in an interview Tuesday on CNBC.
If Bitcoin and forex can be traded the same way with many of the same common strategies and indicators, what is different about them beyond the technical aspects of trading? Let’s look at some of these differences.
Forex and Bitcoin are both the most accessible and open markets in the world. Forex trades from Sunday 1600 CST (Central Standard Time) through Friday 1600 CST. Saturday is the only day with no forex trading! Bitcoin and cryptocurrencies in general are different. They are open all the time.
Both forex and Bitcoin pairs offer significant volatility. Volatility is great! It’s how traders make money! However, Bitcoin and other cryptocurrencies are naturally going to have more volatility due to the nature of its infancy as a tradable instrument. Another reason for the higher volatility in cryptocurrencies is the increased attention it is receiving form sovereign nations. Any little tweet or news blip about Bitcoin is going to send them into a whipsaw.
Forex and many of the platforms to trade forex on have established and prelisted news events that are readily available to the public. Bitcoin is still developing and growing, we may very well see the same economic calendars in cryptocurrencies as we do in forex. And we are still learning what is going to be the most important fundamental and news based information for this very new trading vehicle. But this is no different than forex.
Safety and integrity.
It took a long time for forex to become a respected and safe environment for trading. Are there still shady brokers out there? Yes. But the information for the consumer to find reputable and honest forex brokers is everywhere. You are only limited by your own research in finding a reputable and safe broker, the free market is very good at eliminating bad players.
The same can be said for the exchanges and wallets for Bitcoin. It’s easier today for an unwelcome news story to spread about wallets being raided in Bitcoins than it was for illegal forex brokers in the early 2000s. The pace and speed at which news travels for traders now mostly exacerbates the issue. Has there been theft? Yes. But we are now in a place in Bitcoin and cryptocurrencies where bad players mostly don’t dare enter and good players in the exchanges and wallets have every incentive to provide the best customer service possible. And the longer the exchange and wallet stick around, the more their reputation and integrity will last. There are always going to be risks in online trading, but you get to be the deciding factor in where you put your money and how much you are going to risk.
And for good or bad, many more nations regulatory agencies are keeping their eye on the cryptocurrency markets. Thankfully their intervention has been limited to the safety of traders deposits and going after the bad players. As time goes on, we can expect to see more oversight and protections like forex.
So which is better?
This is a tough question because there is no easy or definite answer. Forex is more established and maybe easier to understand to initially open an account where Bitcoin is newer and requires a little more searching. Which is safer? Each trader assumes their own risk and is their own risk manager. Which is better to trade? They both present great opportunities to trade.
Before Bitcoin came along, forex was the only truly pure traders market. Sure, Futures are traded, but there is so much hedging and actual contract exchanges that happen. And it’s just not that accessible for everyone. Forex is a traders paradise. Forex is often called, ‘The Last Free Market’.
But forex could now be joined by Bitcoin and other cryptocurrencies and be considered, “The Last Free Markets”
Bitcoin is not beholden to any single nation, no single central bank or multinational compact. Bitcoin is the only trading instrument where the actual supply is bought and sold is not verified by a single exchange or collection of large banks.
Instead (and more effectively and honestly) Bitcoin’s integrity is verified by the millions of traders who all have the same ledger that is updated in real time – any discrepancy or attempt to hack or alter is impossible because verification is done by the masses.
In closing, neither instrument is necessarily ‘’better’’ than the other. Want to trade during the Aussie time but volume is low in the forex market because of a Chinese holiday? You don’t have to stay up for the London and/or US session, you can pop right into trading Bitcoin pairs. When the London session closes and the US afternoon is slowing down to a snail’s pace, pop right into trading Bitcoin.
Instead of trying to pick one over the other and trying to find out which is better, safer or more accessible, we recommend finding the best fit for your lifestyle, your goals and the future you wish to build.
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