Differences between crypto trading and fiat trading
One of the key differentiating factors between crypto trading and fiat trading is the degree of volatility that traders can expect to see in both markets. Cryptocurrencies are inherently more volatile than fiat currencies because they are speculative in nature. News, market events, and FUD (fear, uncertainty, and doubt) tend to cause prices to move significantly in either direction during a single trading session. It is not uncommon to see up to 30% gains or declines in the price of cryptocurrencies within a single trading session. In contrast, fiat currencies seldom record such massive price swings consistently. The only times fiat currencies are likely to record huge price swings are often during historical moments such as Brexit, a declaration of war, or massive natural disaster.
2. Barriers to entry
Traders interested in making their marks will find it much easier to access the cryptocurrencies trading market than fiat trading markets. To start trading cryptocurrencies, all you need to do is to find a way to buy/acquire some Bitcoin or Ether; and then you can trade on a large number of the 1620 coins in the market inasmuch as you can find their trading pair on an exchange. Coinbase currently provides support for BTC, LTC, ETH, and BCH, and Binance provides an opportunity to trade about 300 cryptocurrency pairs.
In contrast, forex trading requires you to undergo some serious KYC and AML scrutiny; even after that, your options are still limited on the number of currency pairs available. You’ll most likely find USD, EUR, CAD, AUD, JPY, and GBP pairs but exotic pairs such as an NGN and Thailand Baht (THB) are practically nonexistent.
3.Straightforward free structure
Trading fees on most cryptocurrency exchanges are straightforward, you can easily know how much you’ll potentially pay in fees on a trade before you place such trades. Some exchanges such as Coinbase charge a 3.75% but Binanceis cheaper with a 0.1% free and an additional 50% discount if you have the BNB native coin. Bittrex has a flat 0.25% commission on all trades and deposits are usually free on many cryptocurrency exchanges.
In contrast, trading fees on forex transactions are mired with so much ambiguity and hidden charges. Forex trading platforms usually have different fees for tradesunder $1K, $100K, $1000K as well as different commissions for pips in spreads.
4. Difference in demand and supply dynamics
All cryptocurrencies have asset supply caps at which their “mining” would stop. BTC has a 21 million cap, Litecoin is capped at 84 million coins, and Buterin has hinted that the total Ether supply is capped at 120 million. The fact that there’s a cap on the supply of cryptocurrencies suggests that the demand for cryptocurrencies will eventually outpace the supply once cryptos gather enough momentum for mass-market adoption. In contrast, the centralized nature of fiat currencies means that governments can continue their indiscriminate printing/minting of money to fund their activities without thinking about how it alters the dynamics of demand and supply.
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