Crypto vs. Forex: Which Is More Profitable?
It is tough to find what form of investing works for you as a beginner investor. Both crypto and forex are enticing investment categories, but which one is more profitable?
Crypto is a more volatile market than forex, which means there is more potential for profit in crypto trading. However, forex trading is a more stable form of investing, which means there’s less potential for huge losses. Forex still has the potential for massive profit.
If you came looking for more info on forex and crypto trading, you’re in the right place! Through the rest of this article, I’ll explain the potential returns for both categories, dive into successful traders, and list some pros and cons of both forex and crypto trading.
Crypto vs. Forex
There is no answer to which is better between crypto and forex trading. In reality, both crypto and forex trading have pros and cons that will attract or deter different investors.
Crypto Trading Pros and Cons
As with all investments, there are pros and cons to crypto. Consider these pros and cons before hopping into the world of crypto trading:
|Crypto Trading Pros||Crypto Trading Cons|
|High volatility leaves more potential for big returns.||High volatility makes for larger losses.|
|Cryptocurrencies like Bitcoin don’t experience inflation because of a fixed supply.||Less liquidity makes crypto investments riskier.|
|Crypto is not bound by nine to five trading like forex is. You can trade crypto 24 hours a day, seven days a week.||Crypto trading is less respected than forex trading.|
|Crypto investments don’t have to go through the traditional banking system.||Crypto is mostly unregulated, which leads to a scam heavy trading environment.|
|Low startup cost allows crypto traders to begin their journey without taking on big loans.||There are few reliable educational resources for crypto trading, which means most traders need to rely on self-directed learning.|
Every day new cryptocurrencies promise higher returns for investors who are willing to take on more risk. This means crypto investing is best for someone who isn’t afraid of the stress behind taking on high-risk, high-reward investments.
If you’re looking for a place to start investing in crypto, I recommend checking out our article about the easiest way to make passive crypto income for free.
Forex Trading Pros and Cons
Before you start turning your hard-earned US dollars into Dogecoins, let’s look at the alternative: forex trading.
|Forex Trading Pros||Forex Trading Cons|
|Lower volatility than crypto means there’s less risk of big losses.||Less chance for high returns. While big returns are possible with forex trading, they are less common than in crypto trading.|
|Despite less volatility than crypto, investors can pull massive profits in forex trading.||Less educational resources than stock trading. Forex traders need to teach themselves.|
|Investors have more respect for forex trading than crypto trading.||The forex market has more established traders than the crypto market. Therefore, forex traders are almost always trading against firms with more resources.|
|Low startup cost allows investors to try forex without taking on massive debt.||High-leverage trading in forex is common, which means there is the potential for massive losses. However, high-leverage trading can be avoided.|
If you’re a more risk-averse trader, forex will be the less stressful option. However, becuase of its lower volatility, there is less chance for massive returns in the forex market.
Crypto vs. Forex: Pros and Cons Analyzed
There is no perfect answer when deciding between crypto and forex trading. While crypto trading has the potential to give massive profit on a single trade, it’s also unreliable.
On the other hand, forex is a safer market than crypto, so you can rely on trading strategies for consistent long-term profits. However, you probably won’t get rich from one trade.
There is one key benefit to crypto and forex that I love to highlight. Both crypto and forex do not require massive initial startup capital, which means you can dip your toes in and see which suits you better.
The one key benefit of low startup cost leads me to recommend you try out some easy money-saving tips to build a little capital, then try both crypto and forex.
Crypto vs. Forex: Which Is More Profitable Long-Term?
Crypto is better than forex for long-term trade profitability. Almost every fiat currency experiences inflation, which means long-term trades with forex are almost guaranteed to lose money. Established cryptocurrencies like Bitcoin have fixed supply and a decent profitability track record.
Can You Become a Billionaire From Forex?
You can become a billionaire with forex trading, but the odds are very slim. A solid return for a forex trader is around 10%, which means unless you’re starting with massive investment funds, you’re unlikely to become a billionaire.
That’s not to say there isn’t a lot of money going around in forex. In 2019, forex markets reached a value of 6.6 trillion per day.
3 Successful Forex Traders
I’ll shed some light on a few big-time forex traders to prove that forex trading can make billionaires. Each of the following forex traders has made hundreds of millions, if not billions of dollars from forex trading.
1. Bruce Kovner
Bruce Kovner is a hidden gem of the investment world. Big-name investors tend to take the spotlight, while Bruce Kovner prefers to stay out of the public eye.
Bruce Kovner’s love of anonymity does not reflect on his trading capabilities. Kovner is among the most successful hedge fund managers. Kovner’s hedge fund, Caxton Associates, handled about $14 billion of assets at its peak.
Earlier in Kovner’s career, the amount of money was substantially lower. Kovner’s first trade was for $3,000 taken on loan with a credit card. The $3,000 trade rose in value to $40,000 and dropped down to $23,000 before Kovner sold.
Kovner cites his first trade as an important lesson in risk management, which gave him the knowledge needed to run a successful hedge fund.
2. George Soros
Some forex enthusiasts consider George Soros the greatest forex investor of all time. Considering Geroge Soros’ track record, it’s not hard to see why he’s held in such high regard.
George Soros gained notoriety after shorting the Great British Pound (GBP) in 1992. The single short trade left George Soros with over one billion dollars in profit.
At the age of 91, George Soros is still an active investor. However, no recent trades have held a candle to his billion-dollar 1992 GBP short.
George Soros has written 15 books, so there is plenty of material if you want to take a deeper dive!
3. Richard Dennis
Rags to riches is an understatement for Richard Dennis. My favorite part about Richard Dennis’ early trading career is that his success came from personal investing rather than hedge fund managers.
Richard Dennis started his trading career as a 20-year-old with a $1,600 personal loan from his family. After buying his way into the MidAmerica Commodity Exchange, Dennis was left with $400 of trading capital.
Despite having a minuscule amount of funds to work with, Dennis could trade up with consistent gains year over year. Richard Dennis traded up to one million dollars by the age of 26.
Most of Denns’ trading profit came from the 1970s high-inflation markets. The high-inflation markets of the 70s allowed Dennis to take advantage of predictable currency and commodity pricing trends.
Dennis’ trading methods have been taught in two books, and the results can be back-tested. Back-testing Dennis’ trading methods have found reduced effectiveness since Dennis was trading at his peak.
Can You Become a Billionaire From Crypto Trading?
You can become a billionaire from crypto trading. However, the odds of placing the right trades to build your wealth to one billion dollars is extremely slim, and your odds get slimmer as crypto becomes more established.
You’re probably wondering: why am I less likely to become a crypto billionaire as crypto becomes more established?
The reason is that the annual return of crypto has been slowly reducing since Bitcoin started in 2009.
If you look at the average annual return of Bitcoin since 2009, you’ll it’s 172.73%. With a return pushing 200%, it’s not hard to imagine yourself as a crypto billionaire! But times are changing.
Let’s narrow our focus. Bitcoin has had an annual return of 96.64% over the past five years. You can see the problem: as crypto becomes more mainstream, the market gives a lower average annual return.
With my pessimism noted, crypto is an ever-evolving landscape that pushes out new opportunities to earn billions every day. NFTs have made plenty of crypto billionaires in the past year alone, so it’s not impossible yet!
Best Crypto Exchanges
If you’ve gone through the pros and cons of crypto trading and decided it’s right for your level of risk tolerance, it’s time to find an exchange you can trade on!
Here are a few of my favorite crypto exchanges:
- Uniswap. I love Uniswap because it’s a decentralized exchange built on the Ethereum Mainnet. Uniswap’s decentralization status makes it among the most secure crypto exchanges.
- Nicehash. Nicehash is my number one used exchange because I mine crypto with Nicehash! Nicehash is an easy-to-use graphics card mining software. If you have a powerful gaming PC, you can earn a couple of dollars worth of crypto a day and trade it with minimal fees on the Nicehash exchange.
- Coinbase. What makes Coinbase a great exchange is the volume of currencies available. There are over 100 currencies listed on Coinbase, so it’s a great place to trade if you want to dive deep into the crypto world.
Best Forex Exchanges
Unlike crypto, most forex exchanges work the same. This means the exchange you pick isn’t as important, but I’ll still give you a few options to check out for yourself.
Here are a few of my favorite forex exchanges:
- Oanda. Oanda is a trading platform that has an easy-to-understand user interface. The simple UI makes Oanda an ideal exchange for new forex traders.
- CMC Markets. The key selling point of CMC Markets is its variety of offerings. Widely available trading opportunities make CMC Markets ideal for a forex trader with a wide depth of knowledge of different currencies.
- IG. IG is one of the few online forex brokers to accept US customers. If you’re in the United States, IG is your best option.
Crypto and Forex Trading vs. Stocks
Before I conclude this article, I will make a quick comparison between crypto, forex, and stocks. You probably know more about traditional stock trading, so comparing crypto and forex trading to it will give you a deeper understanding of the flow of the crypto and forex markets.
Is Crypto Trading More Profitable Than Stock Trading?
When comparing basic crypto trading vs. basic stock market trading, crypto is more profitable. The mean return of Bitcoin since its creation in 2009 is 172.73%, compared to the average S&P 500 return of 10.5%.
Admittedly, comparing lifetime Bitcoin returns to lifetime S&P 500 returns may be a skewed statistic. However, if we choose a more fair period, such as the past five years, Bitcoin still has a much higher rate of return at 96.64%.
Is Forex Trading More Profitable Than Stock Trading?
Forex is more profitable than stock trading for predictable short-term bets. Stock trading is a more profitable long-term investment vehicle than forex trading because stocks generally rise in value over time, and fiat currency loses value because of inflation.
There are pros and cons to both crypto and forex trading.
Crypto has more volatility, which leaves more room for big profits. However, the potential for big crypto profits comes with bigger potential losses. Conversely, forex trading is less volatile, meaning you have less risk of loss. However, there is also less chance for big profits.
Different traders should choose different investment vehicles depending on their risk tolerance. If you’re interested in furthering your investment literacy, you should check our article on the 10 easy rules to understand financial minimalism.