Direct from the desk of Dane Williams.
To put it plainly, the answer is no.
Crypto is NOT part of the forex market.
But when it comes to deciphering the intricate relationship between cryptocurrency and the traditional forex (foreign exchange) market, don’t worry.
I’ve got you covered.
Throughout my convoluted trading journey, the question of whether crypto and forex share a common ground has often triggered debate.
In this vast expanse of financial markets, one cannot ignore the undeniable fact that the two realms are distinct entities, each with its unique characteristics and quirks.
But at the same time, both are decentralised markets masquerading as currencies.
Now, you might be wondering, do cryptocurrencies like Bitcoin find their place in the forex market, or are they sailing in separate waters altogether?
Let's explore.
Is Bitcoin considered forex?
In the traditional parlance of forex, where currencies from across the globe are exchanged, Bitcoin remains an outlier.
An intriguing anomaly if you will.
The forex market predominantly deals with fiat currencies, representing the legal tender of nations.
Think the US Dollar (USD), the Euro (EUR) and the Japanese Yen (JPY).
These currencies pair off against each other - USD/EUR, USD/JPY, and so forth - in a standardised fashion that traders use to speculate on currency value fluctuations.
But here's the twist: Bitcoin, our enigmatic digital currency, was born outside this previously established domain.
As such, it operates in its own realm dubbed the "cryptocurrency market."
Unlike fiat currencies, Bitcoin is not tethered to any nation-state or central bank.
It thrives in the decentralised world of blockchain technology, offering a unique proposition to those who dare to venture into the wild west of crypto.
So, in the strictest sense, Bitcoin is not a player in the traditional forex arena.
Forex remains the bastion of fiat currencies, while Bitcoin and its crypto cohorts chart their own course entirely separate.
How is crypto different from forex?
The distinction between cryptocurrency and forex trading goes beyond simple definitions, extending to the very essence of these markets.
In the realm of forex, the market revolves around fiat currencies, such as the US Dollar (USD), Euro (EUR), and Japanese Yen (JPY).
These are established currencies backed by governments and central banks.
In contrast, cryptocurrencies like Bitcoin exist as digital assets, operating on blockchain technology.
They are decentralised and stand free from the influence of any single nation or financial institution.
This fundamental distinction highlights the innovative nature of cryptocurrencies.
Furthermore, the forex market adheres to specific trading hours, mirroring the opening and closing times of global financial centres.
It operates within a structured framework, with defined trading sessions.
In sharp contrast, the cryptocurrency market defies the conventional clock, remaining open 24/7, year-round.
This continuous availability presents unique opportunities and challenges, as crypto traders are never confined to set hours.
Moving on and forex markets are known for their liquidity and relative stability, driven by factors like interest rates, economic data releases and geopolitical events.
Price movements in the forex arena tend to be more gradual.
In contrast, the cryptocurrency realm thrives on volatility.
Prices can experience rapid and substantial fluctuations driven by market sentiment, news events and technological developments.
This heightened volatility can lead to both significant gains and losses in a short span.
Not to mention forex operates within a framework of stringent regulation and oversight.
Governments and financial authorities across the globe impose rules to safeguard market integrity, protect traders and ensure fair practices.
Conversely, cryptocurrencies navigate a regulatory landscape that varies widely from one jurisdiction to another.
The decentralised nature of cryptocurrencies has led to a complex regulatory patchwork, with rules and enforcement varying greatly between countries.
Finally, forex markets attract a diverse range of participants, including banks, financial institutions, multinational corporations and individual retail traders.
The forex ecosystem is deeply integrated into the broader global financial system.
In contrast, the cryptocurrency space is more tech focused.
Here, you'll find less institutional players and more individual retail investors, technology enthusiasts, blockchain developers and a growing ecosystem of underbanked, decentralised finance participants.
Final thoughts on crypto vs forex
In sum, while Bitcoin and cryptocurrencies remain on the fringes of traditional forex, they've carved out a distinctive niche in the financial universe.
The choice between these two realms depends on your risk appetite, investment goals, and the allure of blockchain technology.
But remember, each realm has its own challenges, so tread with caution and explore wisely.
Best of probabilities to you.