The main differences between Forex trading and cryptocurrency, why is the first option so popular in the world these last years?
The theme of the past months is: cryptocurrencies. These digital coins such as Bitcoin, Ethereum and Ripple are based on blockchain technology. Due to the rapid price increase, cryptocurrencies have attracted many new investors to active trading. And many forex traders have started trading in crypt currencies as well as traditional currencies.
- Anyone who studies the market on a daily basis will soon see that the two products, forex and cryptocurrencies, behave very differently. This means that as an active trader you also have to make other decisions. In this article we will discuss the differences between ‘normal’ currency trading and cryptocurrency trading. The website CommodityTradeAlert.com is one of the best options to find the right price for all types of services and brokers.
What is the background for the hype around cryptocurrency?
All normal currencies are issued by the central bank of a country (or group of countries). Goods and services produced by that country are paid for in the local currency. When the economy of that country is doing well, the demand for the currency increases, and it increases in value compared to other currencies.
The central bank can influence this by changing interest rates and by putting more or less money into circulation. The market reacts to this with supply and demand. As a forex trader you try to predict this, and earn money from it.
- Cryptocurrencies do not belong to a certain country. Coins such as Bitcoin, Ethereum, and Ripple only exist on the blockchain. The blockchain is maintained in a decentralized way, and crosses national borders.
- You can pay with cryptocurrencies at any store or service provider that accepts them, but no one can be forced to accept a payment in crypto. As a result, the value (in the long run) depends on how many retailers and service providers accept a crypto currency.
Why is crypto such a good investment for a lot of people?
There is also no central bank that determines the interest rate or the money supply in crypto. Inflation or deflation are ingrained in the code of the cryptocurrency. This differs per currency. For example, the number of bitcoins in circulation is increasing less and less rapidly, until it ultimately remains the same at 21 million BTC.
- The number of ether in circulation is growing faster than the number of bitcoins, so ETH has more inflation. Ripple has a fixed number of XRP that can never increase. Because the supply of a cryptocurrency is fixed in the computer code, the value mainly depends on demand.
Acting on the news when trading on the internet in Chile
If we look around us, we have to conclude that we can hardly pay with cryptocurrencies anywhere yet. Only two years ago there were small retailers and cafes that accepted payments in BTC, but the transaction costs have become too high for small payments at the end of last year. A good option is the comparison website C-TradeAlert.CL for online brokers in Chile.
This may change with the recently introduced lightning network. Ethereum is used for all programs running on the Ethereum blockchain, but those programs are hardly used yet. With other crypto currencies you can’t do anything at all.