The forex and crypto
markets are two popular financial markets with a combined market capitalization
worth over US$ 7 trillion. Cryptocurrency trading only became popular over the
last decade but has grown in leaps, led by Bitcoin, the first and most valuable
cryptocurrency today.

Investors have the
flexibility to invest in either or both forex and crypto markets and can
leverage their advantages to build their investment portfolios. Several factors
are essential when considering the market, but investors typically look at each
market’s opportunities.

How forex impacts the financial sector

The financial
landscape has witnessed remarkable transformations over the last decades, with
technology spearheading the change. Although Bitcoin gained significant
attention and value, the sheer number and volumes involved in trading forex indicate how the
forex market has quietly shaped global finance.

Here is how forex is
surpassing Bitcoin and playing a pivotal role in shaping the financial
landscape globally.

Forex: the most significant financial market

The forex market is
today’s largest financial market; traders move over $6 trillion each trading
day. Forex traders come from every continent and have more market activity than
the stock or crypto markets.

This is an important
factor that attracts various classes of investors and leads to the development
of technological solutions that advance the financial sector. The reach and
capacity of the forex market also allow the smooth flow of international trade
where currencies must be exchanged.

Forex plays a crucial
role in every country’s stability and growth, so central banks have
forex-friendly policies to protect their countries.

Regulatory framework and consumer protection

Decentralization is an
essential attraction for Bitcoin and cryptocurrencies, but it raises the
question of regulation and protection for investors. The financial landscape is
built on trust and regulatory frameworks guiding the operation of financial institutions.

The forex market, on
the other hand, is well-regulated internationally by central banks and
government authorities. For example, securities and exchange commissions or
monetary authorities set anti-money laundering requirements for brokers.

They also stipulate
conditions that brokers and traders must meet before getting operational
licenses. This is necessary to prevent the manipulation of market data and
prices of currencies for ulterior motives.

Volatility and stability

Investors leverage volatility
to make profits but also understand that negative volatility could impact their
portfolios. This is also crucial to the stability of financial systems and
institutions that thrive on the value of currencies.

Bitcoin and other
cryptocurrencies are intrinsically volatile and far less stable than goat
currencies. For example, Bitcoin fell more than
56% from its all-time high price in 2022.

But forex currencies
limit the impact of volatility by providing traders with a range of pairs for
diversifying their trades. This strategy is also used to hedge funds during
inflation and stabilize the market.

Structures
and market participants

Unlike Bitcoin, the
forex market is well-established following decades of building and development.
The evolution of forex trading over decades places forex above crypto in terms
of stability and market participants.

Today, institutional
traders such as banks, hedge funds, and investment brokers provide deep market
liquidity and stability in forex trading. Various trading strategies and
investments promote a diverse ecosystem where every trader can function.

The infrastructure of
the forex market also makes it easy to regulate and develop solutions to
emerging challenges that traders face.

Integration with the global economy

Forex is a critical
component of international trade and commerce, playing an essential role in
shaping the global economy. Forex facilitates cross-border and international
payments, currency exchange, and import-export.

Forex trading also
influences the strength of currencies and their exchange rates which are
crucial to the competitiveness of countries in the global financial landscape.

Central banks carefully
plan and deploy monetary policies to
influence the exchange rate, the price of goods and services, and the economic
strength of countries. Even political stability in any country is an indirect
function of financial stability.

Liquidity and accessibility

Forex’s unparalleled
liquidity is one of its main advantages over Bitcoin. Because of its massive
trading volume, forex enables traders to open and close trading positions
quickly without the risk of market manipulation.

Additionally, the
market’s accessibility is unmatched, with a wide variety of online platforms
and brokers enabling retail investors to engage in forex trading with just a
little capital.

Trading currencies on
the largest financial market has been made more accessible, enabling people and
small investors to participate. The deployment of modern technologies also
improves access to the forex market.

Although
cryptocurrencies are projected to bring decentralized finance globally, the
forex market is shaping global access to financial investments locally and
internationally.

The future of forex trading

The daily volume of
forex is expected to hit $8 trillion within ten years, but several factors will
impact how traders participate in the market. One of those factors is the
innovative central bank digital currencies (CBDCs).

CBDCs are digital
versions of fiat currencies issued and regulated by central banks. Although
they are built using blockchain technology, CBDCs remain centralized under the
authority of the issuing countries.

While the value of
CBDCs will reflect the fiat currencies, there are varied opinions on their
impact on foreign trade and exchange rates globally.

Another critical
factor is the design and deployment of AI technology for analyzing and trading
forex. Will forex become more difficult for retail traders as institutional
traders deploy AI?

Forex trading remains
the most significant financial activity in the economic landscape today and
shapes the policies and practices observed by traders. Although Bitcoin is
revolutionizing finance, the forex market surpasses it in crucial qualities
such as liquidity, stability, and infrastructure.

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• Source: https://www.forexlive.com/Education/unveiling-the-future-how-forex-is-surpassing-bitcoin-20230522/