What Forex Traders Need to Know About Getting Started with Crypto
For experienced forex traders, crypto trading will look very familiar. In terms of volatility, signals, and news trading, crypto trading, and forex trading have a lot in common. Yet there are differences—some small and some vast. Here’s what you need to know before getting started.
Crypto Trading is Still an Emerging Investment
Crypto trading is still coming into its own as an investment vehicle. Consequently, there are unique resources still such as new cryptos, exchanges, regulations, and trading platforms emerging. Some of what’s out there is a little like the “wild wild west.” You can’t take anything for granted with cryptocurrency. The sector moves quickly. Things are constantly evolving.
As a forex trader, you probably know that this type of evolution and risk can yield incredibly high rewards. Yet unlike the forex market, these scenarios are unprecedented. There is little historical information that can be analyzed in terms of crypto.
With that in mind, you’re going to need to lean heavily on your tools. Through services such as i-Pandora, you can work with multiple exchanges and known technologies like MetaTrader5. Mechanically, crypto trading is almost identical to forex trading. The differences lie in context.
Trustworthiness and Reputation is Everything
Crypto exchanges have disappeared overnight, taking all of the money held on them with them. Just recently, $140 million was reported to be lost forever because a cryptocurrency exchange founder died. Cryptocurrencies themselves rise and fall all the time, some of them disappearing entirely due to technical glitches or fraud.
All of this means that a forex trader needs to pay attention to the trustworthiness and reputation of the services they work with. You can’t just use any exchange: that exchange could disappear. You need to research the services you use, in addition to looking at the structure of the coins and companies that you decide to back.
High Volatility Leads to High Rewards
Forex is a high volatility, high-risk market. But it’s not even close to the volatility, risk, and reward provided through cryptocurrency. Cryptocurrency can swing in value tremendously quickly. It’s these rapid-fire movements that provide value to a crypto trader. After all, a forex trader isn’t buying crypto to hold it indefinitely.
This further emphasizes the importance of the right technology. Without the right exchange technology and trading platform, it may simply not be possible to initiate trades as quickly as is necessary to capture profit. The crypto market moves so impossibly fast that a trader needs to have their exchange constantly accessible, in addition to their trading signals.
News and Speculation Play Pivotal Roles
Forex traders frequently trade currencies based on news and speculation. This is likewise extremely important with cryptocurrency. For some cryptocurrencies, there’s no intrinsic value to the coin whatsoever. The intrinsic value comes from what everyone generally agrees on the value.
Not only does that mean that traders need to be exceptionally conscientious about the market, but it also means that the market can be susceptible to manipulation. Investor sentiment can quickly change the legitimate value of a coin.
This further means that traditional market signals are often less useful on the crypto market than simply reading sentiment. When the market believes that the coin is likely to go up, the market will push the coin up. If the market believes the coin will go down, it may crash very quickly.
Crypto is a Different Type of Currency
While the Italian economy might crash, it isn’t going to disappear overnight. Individual cryptocurrencies could. Cryptocurrencies are being created and dissolved every day. Investing in new crypto is more akin to investing in a penny stock than investing in a currency: it may go nowhere or it may go straight up.
Unlike the forex market, cryptocurrencies aren’t being used as liquid currency. They’re primarily being used as individual investments. This is something that needs to be considered, especially when looking at more exotic currencies as investments. Not only is the technology behind the cryptocurrency important, but so is its general value proposition to the crypto market.
This does require some additional research. A crypto investor should know the basics of blockchain technology and how it works. If a technology is susceptible to a 51% attack, it could become worthless. If an investor doesn’t understand what a 51% attack is, they may not be properly valuing the investments they have.
Liquidity Can Be An Issue With Cryptocurrency
While you can go to virtually any bank and turn USD into EUR, cryptocurrencies are a little more challenging. More exotic currencies often can’t be purchased in USD or aren’t available on trading platforms. If you are holding a large value in cryptocurrency, it may be almost impossible to sell to exit out the market all at once: you may need to trickle your sales in slowly.
For a forex trader, this can be an issue: if you have low liquidity, you can’t keep investing in additional assets and building your wealth. Services like i-Pandora can help. i-Pandora provides integration to exchange services, making it possible to easily liquidate funds, exchange funds, and invest in even rarer types of cryptocurrency. Through i-Pandora, you can manage multiple exchange accounts, initiate trades quickly, and improve both your liquidity and your mobility.
What’s the takeaway? Cryptocurrency is an incredibly exciting new investment platform, especially for forex traders. As a forex trader, you’re already accustomed to high risk, high volatility, and high reward. However, the world of crypto can also be dangerous. A trustworthy service such as i-Pandora can help forex traders enter into the crypto market without encountering many of the potential risks.