Forex and Bitcoin Market Regulations
First of all, unlike Forex’s GBPUSD or EURUSD, trading Bitcoin is trading digital currency, independent of any government, institution, or any third party that may have a direct influence on the currencies at hand (decentralization).
In Forex trading, an exchange is normally regulated by institutions like Financial Conduct Authority（FCA) or Financial Services Agency(FSA).
Foreign exchange regulation is a form of financial regulation specifically aimed at the Forex market which is decentralized and operates with no central exchange or clearing house. Due to its decentralized and global nature, the foreign exchange market has oftentimes been more prone to foreign exchange fraud and has been less regulated than other financial markets.
While Bitcoin regulation is not yet available in the market at the moment. The legal status of Bitcoin (and related crypto instruments) varies substantially from state to state and is still undefined, or changing, in many of them.
Long-Term Investment or Day Trading?
Bitcoin is considered to be more volatile than typical currency pairs, especially major ones such as JPYUSD or GBPUSD. People also call Bitcoin a digital gold, it means that it has characteristics features for stocks.
However, Bitcoin is mostly seen as a long-term investment for those who believe that its value will increase exponentially in the future.
Liquidity & Stability
Liquidity is the degree to which the market allows you to buy and sell assets at stable prices and easily convert your assets back into cash. The greater the liquidity, the more stable the market is.
The foreign exchange (forex) market is often described as the world’s most liquid financial market, and that’s true, its average daily turnover reaches the trillions of dollars. Bitcoin’s one the other hand is still only worth several billions of dollars (data from Feb 2019), but it has more potential to grow as it is far newer and is getting more and more widespread nowadays. Bitcoin and other digital currencies are the most rapid developing markets in the world.
The forex markets operate 24 hours a day, Monday to Friday, but are off during weekends and some important holidays because banks are off and can not deal with currency exchanges during these time period.
Bitcoin, as it is entirely digital, does not need financial institutions, such as banks, to exchange. Its market works non-stop 24 hours a day and 7 days a week. This is considered to be one of Bitcoin’s biggest advantages, but can also be a challenge for investors for participating in the market around the clock.
A general Forex trading platform can mostly offer 50:1, 100:1 or even 500:1. leverages to traders.
Bitcoin spot trading exchanges often offer no or low leverages such as 3:1 or 5:1; However, Bitcoin perpetual contract exchanges, like Bybit.com, can offer up to 100:1 leverage.
In many ways, the Bitcoin to forex comparison is an apple to oranges analogy. It is true that both involve the electronic trade of various currency pair forms. Yet, the size, structure, and behavior of each venue are very different from one another as is the time for which they existed.
Of course, opportunity knows no bounds. Many active traders have foregone the relative safety of the forex market for the potential of BTC and cryptocurrencies. Ultimately, the decision of whether or not to trade forex or BTC is dependent upon an individual's objectives, risk tolerance, and resources.
This concludes today’s article about Forex trading and Bitcoin trading. We hope you learned a lot, enjoyed the read and stay tuned for more great content.