Can cryptocurrency be the next big trend in forex trading?

Let’s go back to the late 1990s. Wall Street still relies on the trusty landline, investors search the business sections of newspapers for stock prices, and forex trading has just discovered the internet. And today, in the present, all major financial markets are geared towards the next big trend: cryptocurrencies.

As a testament to the meteoric rise of cryptocurrencies, especially Bitcoin, the number of institutional investors is increasing year after year. This year’s approval of spot Bitcoin ETFs has even opened the doors for traditional investors to enter the crypto space. Last month alone, Bitcon ETFs brought in around $2.4 billion in fresh capital.

Retail investors are also jumping on the bandwagon. By the end of 2023, 580 million people owned crypto assets. While some believe they are chasing the hype, the data suggests otherwise. According to Chainanalysis, many of those who invested in crypto during the 2021 boom are still sticking around.

Take CryptoProcessing, for example, a company that specializes in providing solutions for the crypto industry. CryptoProcessing is licensed in Estonia and has over 10 years of experience in the crypto industry, making CryptoProcessing the first choice for companies looking to introduce crypto payments. The payment gateway supports more than 20 popular cryptocurrencies and more than 40 fiat currencies.

Impact of Bitcoin Expansion on Forex

What does this all mean for Forex? A rise in retail and institutional investment activity coupled with a regulatory nod from the Securities and Exchange Commission (SEC) signals an “institutional maturity” of the crypto market.

Now Forex can benefit from this influx of experienced, long-term investors. Moreover, these new people have a lot in common with Forex’s target audience: they are often younger, technically savvy, and happy to take calculated risks.

Why is Forex embracing cryptocurrencies?

The adoption of cryptocurrencies in forex trading is in full swing. By the end of 2022, major forex market makers like Deutsche Bank, JP Morgan, and Bank of America were all on board with cryptocurrencies. Brokers are also joining in, allowing their clients to fund trading accounts with hot cryptocurrencies like Bitcoin and Ether. But it’s not just about payments – some brokers allow crypto CFDs and trading pairs.

*discovered by Earnforex

Max Krupyshev, CEO of CryptoProcessing, comments on the growing attractiveness of cryptocurrencies for Forex companies.

“While the volatility of cryptocurrencies is not ideal for storing your funds, it does present unique opportunities for traders. They can make significant profits from price fluctuations. Younger generations in particular are open to the idea of ​​trading cryptocurrencies. By allowing them to use their existing cryptocurrency holdings, forex firms can attract these new customers before they move to dedicated cryptocurrency platforms,” ​​says Krupyshev.

But introducing cryptocurrencies is not just about attracting new customers, it is also about retaining the customers the broker already has. A recent study has revealed an interesting trend: more than half of retail investors would consider leaving their broker if it did not allow trading in digital assets.

Crypto security against inflation

Cryptocurrencies can also be used as a hedge against inflation – and that’s another reason to get into Forex. Although volatile, crypto prices tend to move independently of traditional financial markets. Studies have shown that Forex portfolios balanced with cryptocurrencies weathered the economic turmoil brought on by COVID-19 better than those that were not balanced with cryptocurrencies.

Lower fees for cryptocurrencies

Cryptocurrencies also have operational advantages. Compared to traditional wire transfers, cryptocurrency transactions incur lower fees, averaging around 1%. Speed ​​is another advantage. Standard settlements for most currencies take 2 business days, with a few exceptions. Popular cryptocurrencies settle within minutes or even seconds.

Challenges remain

Volatility

As a younger asset class, crypto comes with a number of concerns. The biggest of these is volatility. Cryptocurrencies can experience sharp price fluctuations in a short period of time, which can be unsettling for forex traders. Of course, there is the potential for profits, but there is also the possibility of incurring a loss.

Regulation

Regulation, or lack thereof, is another obstacle. Of the roughly 100 countries that allow cryptocurrencies, only 62 have actual regulations.

Diploma

With crypto expansion continuing, there is still a lot of hope for forex trading, with Europe’s MiCA and the US approval of Bitcoin ETFs suggesting that the world may be moving towards more unified and thoughtful crypto regulation.