Forex VS Bitcoin Trading: Which One Brings Better Profits?

Right from the beginning, it’s important to note that both Forex and Bitcoin trading are high-risky activities that can quickly drain your bank account. Like anything else, trading takes discipline, skill, and practice in order to profit from.

Some experts have estimated that only 1% of people who attempt to trade Forex end up being successful in the long term.

Whether that figure is accurate or not it’s indicative of how difficult it can be to trade successfully.

That being said, it ispossible to make a profit trading Forex or Bitcoin and in this article, we’ll look at some different scenarios and how they affect trading profitability. 

Known vs. Unknown Supply Rates

Although Bitcoin is more volatile than the Forex market, one area where it’s more stable is its supply curve.

Bitcoin has a set issuance rate that regularly decreases every four years. In fact, Bitcoin’s issuance rate is so predictable that we know what it will be all the way out to the beginning of the next century.

Why is that applicable to profits? Because the issuance rate is known it’s not possible to make a profit betting on a change.

Forex, on the other hand, deals with currencies that are controlled by central banks.

At any moment a central bank can decide to issue more of a currency, increasing its inflation and decreasing its value in relation to other currencies.

Thus a Forex trader can make a good profit if they can reliably predict when countries will change the rate at which they issue their currency.

Bitcoin traders cannot make a profit in this way. While bitcoin halving happens every four years, this is typically priced in far in advance so that it’s not possible to trade it.

Forex is More Predictable

Large Forex markets respond to the news. A central bank is going to start QE so the exchange rate of a currency falls.

Oil prices rise so oil-producing nations will probably experience a stronger currency as their GDP goes up. And so forth. News, be it positive or negative, tends to have a direct impact on the exchange rate.

Traders who have an insight into what will happen in the future can take out a trade and make a profit. Any trader who is good at distilling information and predicting future events should probably trade Forex as the market is doing a reasonably good job of responding rationally to events.

Bitcoin on the other hand… Is different. Because it’s such a speculative asset and because it’s still such a young asset, Bitcoin routinely trades independently of the news.

Good news comes out and the price may go down. Bad news, which should drive the price down, may actually lead to a price increase. It’s very difficult to predict how Bitcoin will respond to anything as it seems to trade to a different tune than what most would expect.

So if you’re a news-driven trader it will definitely be easier to make a good profit in Forex compared to Bitcoin.

The Liquidity Factor

The liquidity difference between Forex and Bitcoin is so substantial that it’s not even like they’re in the same league.

It’s commonplace to see $5 trillion in daily trading in the Forex market whereas with Bitcoin, plenty of days there is less than $1 billion in daily trading volume.

So the Forex market has about 5,000x the daily trading volume of Bitcoin. If you include all cryptocurrencies then the daily trading volume is only about 2,500x the daily crypto volume.

This makes Forex a much better place to trade if you plan to put on large orders. The Forex market can absorb huge orders on dozens of different currency pairs.

The problem with Bitcoin’s lack of liquidity is that even a relatively small order size can influence the market.

We recognize that most people who read this probably aren’t going to make $50 million trades on a daily basis.

However, it’s important to consider that the small daily trading volume makes Bitcoin more susceptible to price manipulation by whales.

People say that all markets are affected by whales and this trust, however, Bitcoin’s smaller size means that there are many, many more whales that can do the manipulating.

Thus, for traders who would like to see minimal interference from whales, Forex is probably a better market to make profits.

The one advantage of Bitcoin’s manipulated market, however, is massive volatility that can initiate big, sudden moves that can make great profits to thus who know how to benefit from the situation.

More Middlemen

One of the big problems with Forex is the middlemen who take profits from traders. From the brokers to the exchanges, there are all sorts of costs baked in (hidden fees as well) which can make it harder to turn a profit.

On top of that, Forex traders often use leverage which leads to fees for position maintenance.

While Bitcoin certainly isn’t free to trade, it’s often much cheaper to acquire and trade. Bitcoin can be bought for a minimal fee via a bank transfer.

Once you have Bitcoin, you can trade it on a spot exchange like Binance for a 0.1% fee or take out leveraged long and short positions on a platform like Bitmex for a relatively low fee.

There are fewer middlemen in the crypto marketplace which makes it easier to turn a profit compared to trading with Forex.

Finding the Right Market

There is no hard and fast rule which says Bitcoin is more profitable than Forex, or vice versa.

The most profitable market depends to quite a large extent on each trader’s individual skillsets as well as preferences.

For instance, some traders simply won’t enjoy trading Bitcoin’s highly volatile, non-news-driven market. While other high-risk traders may find Forex dull.

Thus you’ll need to figure out which market is best for you and then focus on learning and mastering the skills needed to make a maximum profit on every trade that you lay down.

Author: Mary Ann Callahan

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