Until recently, the system of exchanging fiat currencies was completely uninteresting to people. If it works — well, let it work. And so it might have continued even further, if there were no cryptocurrencies.
Why are Crypto exchanges more interesting than Forex?
In the 15th century, the Medici family opened banks all over Europe. They had to deal with multiple currencies to lend and raise money in their dealings with kings, bishops, and merchants. Thus, they created the first complex system of foreign currency exchange and effectively launched a new practice-organized institutional currency trading.
Over time, it has grown into the largest financial market in the world. Despite the fact that it took its modern form only about 50 years ago, the daily volume of the forex market has reached $6.6 trillion. For comparison, the average NASDAQ volume is about $4 billion.
However, currency exchange does not seem to be interesting to the public. They’ve had their share of scandals and investigations, but they’re nowhere near as famous (or infamous) as the stock exchanges. Most people don’t even care who deals with currencies, or what they do there.
Another thing is that crypto exchanges are a much more exciting, and even infamous, topic. They are trading with much smaller amounts of money (at the beginning of the year, the combined daily trading volume of the three leading exchanges was only about $21.6 billion), but how many interesting things are happening around them! And crypto enthusiasts are closely following them, and they react sharply to news and updates.
Just look at the reviews of crypto exchanges on Revain. They are emotional and detailed, and the authors are interested in the topic. Some praise their favorite platforms, while others express frustration with less successful projects.
Fundamental differences and similarities
Obviously, it’s the novelty. Crypt is still interesting and mysterious. It’s usually easier to get people to talk about Bitcoin than it is to talk about US dollars or rubles. But that’s not all.
First, both forex and cryptocurrency are usually very easily accessible. While you can’t usually buy Bitcoin and Ethereum from a local bank, you can purchase them online. In some jurisdictions, you may need to provide some documents, but it does not require extensive paperwork.
Secondly, both types of trading are available. Although buying a plot of land or a house is usually expensive, anyone can become a cryptocurrency or Forex trader
This is where the main common features end. Now about the most important differences:
- Forex involves active mediation by brokers, banks and other intermediaries.
- Cryptotrading, on the other hand, still operates in a kind of gray area. Governments around the world create new laws, but they can’t issue them, and crypto exchanges remain semi-legal. And it is usually quite difficult to regulate them, because of their decentralized nature.
- Fiat’s exchange rates depend on politics and the national economy, as these are, after all, state-issued assets. These things can also affect the cryptocurrency, however, a direct correlation between them is rarely observed. Some experts predicted that the price of Bitcoin will not suffer even from the US presidential election, and will grow regardless of who wins. That’s exactly what happened.
- Forex exchanges are usually secure and have certain security mechanisms in place to protect traders. Alternatively, you can just buy cash and forget about hackers.
- But crypto exchanges are more risky. They are often targeted by hackers seeking to gain control of other people’s cryptocurrency wallets.
Despite the fact that forex is a well-established and truly massive sector of the global economy, cryptocurrencies are still a new and developing industry. They are inclusive, easily accessible, and largely self-regulating.
And most importantly, they often evoke a variety of emotions. Forex trading is a purely professional and materialistic activity. At the same time, many crypto investors believe in technology and the decentralized dream.
These unique sentimental ideas, combined with the potential for growth, are what sets crypto exchanges apart from their fiat counterparts. New and interesting things are always given more attention, even if they bring less profit.