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The Rise of Cryptocurrencies and their Influence on Forex Trading

The Forex market is a highly competitive space where only those that follow the trends do the analysis and put in the work are profitable.

It is a rapid, fast-paced, risky environment that allows independent investors to make money.

Different trends and factors can often influence the market and the exchange rates for foreign currencies.

Things like economic crises, recessions, and cryptocurrencies.

In this article, we will examine how the different cryptocurrencies affect the Forex market.

Forex Trading

The Basics: What are Cryptocurrencies?

This article assumes that you already know about crypto and its applications, but in case you don’t. Here is a rapid overview.

The idea behind crypto is that it is a way to cut out banks from independent transactions between people. The idea is to provide a decentralized approach to handling money and, by doing so, make transactions that would typically last hours or even days only take a couple of minutes.

Of course, it is a very new, non-regulated, and risky space.

Some of the most popular currencies out there, and the ones we will focus on, are Bitcoin and Ethereum.

What has Crypto Done to The Forex Market?
As a relatively new topic, Crypto has undoubtedly had a massive effect on the Forex space.

Before the rise of this new digital currency, Forex was the only thing that was known for high-risk, high-reward trading. Where volatility was impossible to determine, markets could still be somewhat predicted.

There were many platforms for Forex trading, like MetaTrader4 (or mt4 for short). There were versions of mt4 for pc, phones, and different compatible devices.

But since the introduction of this new currency, both markets and trading platforms have had to adapt.

The Evolution of Trading Platforms
In the sight of a new way to exchange goods. New platforms that began to steal the show emerged. Most notably Binance.

However, MetaTrader4 was not ready to step down and swiftly changed its platform to include cryptocurrencies to stay in the market.

This was necessary since methods were needed to track crypto trading pairs to traditional fiat currency.

The New Trading Pairs
Crypto integration into these platforms saw a general volatility rise for the market, making for a more dynamic and even more competitive market.

The new crypto trading pairs began to rise in popularity and rapidly take over traditional Forex trades. However, foreign exchange currency is impossible to rule out.

Both platforms and some people kept up with the change and made enormous amounts of money as a consequence.

Direct Interactions Between the Two Markets
As a result of the co-evolution of both markets, the Forex market has seen the most significant change it has ever had.

Crypto News and Its Effect on Fortex.
It is undeniable that any news, rumor, or hoax gets big enough publicity, but with the introduction of cryptocurrencies, this has reached an all-time high.

Any positive news on crypto automatically boosts market sentiment in the Forex space, as the positive information is often transposed to the Forex market. This happens regardless of what the news is in regards to.

However, this means that any bad news also has a negative influence on Forex. This is why Forex traders have had to adapt and be on the lookout for information on both markets.

Risk and Speculations
If there is a chance for more money to be made, there is a chance for more money to be lost.

Speculations and risk are topics that always arise when discussing either side of the market. But nothing compares to how much this is true for crypto.

Just recall the huge price dip of Bitcoin. From $60.000 to nearly half today. Suppose this were to happen to any of the global currencies in the world today. It would undoubtedly lead to total economic failure for the victim country.

What Does the Future Hold?
It is challenging to tell what the future will hold for both markets. If it were easy, then everyone would be rich.

However, we can safely make some assumptions related to the topic.

Although nothing is certain. We can certainly speculate.

Cryptocurrencies like Bitcoin or Ethereum, also known as stablecoins because of their relatively stable price, are on their way to becoming significant assets in regard to forex trading.

The whole idea of a decentralized non-controlled market is a fascinating one, and a lot of the world's wealthiest people are starting to take a look at what it can do and what it can be used for.

Elon Musk probably being the most famous one.

At the current rate of growth. Cryptocurrencies will inevitably see massive regulations. And as Kevin O’Leary and many others have put it.

“Now is the time to decide if you want to get in before or after regulations hit.”

To conclude this article, crypto is a new and exciting thing that has hit the world economy by surprise.

It has instated and proposed a new way in which we think about the economy and money.

Its influences on older markets like the Forex and stock markets are bound to continue to evolve until one day, either everyone or no one will be using it.

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