Global financial markets have been one of the most profoundly disrupted industries with the advent of cryptocurrencies over the last decade. As a hugely popular segment, crypto forex trading, which allows speculators to trade cryptocurrency pairs as CFDs (contracts for difference), is redefining traditional forex markets.
Properties such as decentralization, transparency and anonymity make cryptocurrencies and crypto Forex brokers popular. The crypto market now has a current market cap that exceeds the GDP of some economies belonging to the G20. The emergence of these digital assets has also led to a novel asset class for traders – crypto forex pairs.
Like regular forex, crypto-forex allows traders to speculate on price movement between two currencies. The main difference is that one of the currencies in this pair isn’t fiat money, like the US dollar or Euro, but a cryptocurrency like Bitcoin. Now, leading platforms offer 100’s of crypto crosses, with BTC/USD, ETH/USD and LTC/BTC being some of the most traded.
The crypto forex ecosystem is expanding at a breakneck pace. Daily trading volumes across popular brokers now exceed $3 trillion as more retail and institutional players continue entering this market. In fact, AiteGroup estimates that crypto forex volumes could hit $400 billion by 2025.
So, what’s driving this exponential growth, and why are crypto-currencies redefining forex? Several key factors are at play.
Firstly, cryptocurrencies themselves are disrupting financial services in a major way. Being digital, decentralized and borderless, cryptocurrencies allow instant global transactions with very low fees. This is leading to a steady decline in fiat money, boosting crypto adoption. Crypto crosses represent the intersection of these digital assets with forex trading.
Secondly, crypto crosses tend to be far more volatile than regular currency pairs. For instance, Bitcoin is notorious for 10-20% intraday swings, even during periods of low volatility. Such huge price moves mean crypto crosses offer traders greatly amplified profit potential compared to traditional forex.
This volatility is also attracting large numbers of high-frequency and algorithmic traders to this segment. Automated trading systems thrive in high-volatility environments, and crypto crosses perfectly fit those criteria.
Moreover, cryptocurrencies trade 24/7 as they are completely decentralized. This gives crypto forex traders seamless access on nights, weekends and holidays. In contrast, fiat forex markets close on weekends, restricting traders to about 12 hours of market access per weekday.
In the accessibility theme, crypto crosses are also more open to retail traders than institutional currency markets. Cryptocurrencies were designed as decentralized assets managed by users, as opposed to large entities. Such an ethos has enabled small traders to take a more active part.
Finally, the crypto forex ecosystem itself is seeing major innovation. Leading brokers now offer features like 100x leverage, social trading, AI-based market analysis tools and advanced charting. Such functionality improves the trading experience substantially compared to traditional forex platforms.
As is evident, crypto crosses are redefining currency and even commodity trading in a major way. They represent the confluence of decentralized digital assets with forex while also expanding the possibilities with 24/7 availability and extreme volatility.
While crypto forex is still in its infancy, leading estimates suggest it could rival institutional currency trading within the next 5-10 years. Just as the internet totally changed the way business and commerce work for good, crypto is set to disrupt financial markets, with trading pairs like BTC/USD and ETH/EUR leading the way.
