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Crypto and Forex

Date Modified: 06/08/2023

Cryptocurrencies have been around for over 12 years, starting with Bitcoin in 2009, and have become increasingly popular ever since. But why would we mention Cryptocurrencies when we are discussing Forex? In this article, we will discuss the relationship between Cryptocurrencies and Forex trading and how to get trading access to both.

What are Cryptocurrencies and How Do They Relate to Forex?

Cryptocurrencies are a form of digital or virtual currency that can be used to purchase goods, exchange for other cryptocurrencies, or be traded in the form of Contracts for Difference on platforms such as Plus500. When trading cryptocurrency CFDs, you are effectively speculating on the price movement of the underlying instrument.

Moreover, Cryptocurrencies can be paired against other cryptocurrencies, they can also be paired against fiat currencies like the US Dollar (USD), the British Pound (GBP), and the Euro (EUR) hence making up a Forex-Crypto pair.

Furthermore, Cryptocurrencies are known to be highly volatile, sometimes experiencing massive price spikes or plunges in just one day. Therefore, you should always use risk management strategies and tools to avoid trading more than you can afford to lose. Plus500 offers free-of-charge risk management tools to help you attempt to minimize your losses in addition to free how-to trading videos and articles to help you make more informed trading decisions.

How to Trade Cryptocurrencies

There are many ways to trade Cryptocurrencies, two of which are purchasing them from a Crypto exchange and trading CFDs on Cryptocurrencies through a trusted CFDs provider like Plus500.

There is a difference between buying/selling cryptocurrencies and trading CFDs on cryptocurrencies. You can purchase a cryptocurrency directly from a relevant Crypto exchange, but you would also need to create a cryptocurrency wallet and pay high fees for the transaction. In addition, you would have to store your cryptocurrency in a Crypto Wallet and remember the passcode in order to open it, as well as ensure that your device is protected from hacking threats which can risk your Cryptocurrencies.

On the other hand, if traders want to trade without dealing with the aforementioned factors, they can do so by trading cryptocurrencies’ CFDs. Trading CFDs on Crypto allows you to speculate on the price movements of the underlying asset without owning it. This means that you make gains or incur losses as a result of price movements in the underlying asset. Plus500 offers Contracts for Difference (CFDs) on a range of cryptocurrency pairs and instruments like Axie Infinity, Uniswap, Filecoin, Chainlink, Bitcoin Cash ABC, Ethereum, Bitcoin, and more, all of which are traded against the US dollar.**

Computer and tablet showing the WebTrader with Cryptocurrency graphs.

Illustrative prices.

Cryptocurrency Trading Can Be Similar to Forex Trading

When trading cryptocurrencies, there are a few things you should keep in mind. Firstly, there are major cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH), and Solana (SOL) in the same way that there are major fiat currencies, such as USD, JPY, GBP and EUR. These major cryptocurrencies have the highest trading volumes and are used as base currencies against both fiat currencies and other cryptocurrencies.

Secondly, CFD trading on cryptocurrencies and Forex is quite straightforward on the Plus500 CFD Platform, with the bid and ask prices clearly displayed. You can speculate on whether the price of the reference instrument will go up or down and place the relevant Buy or Sell order on Cryptocurrencies, Forex, and more.

Important Facts About Trading Cryptocurrencies

While there are similarities and links between Cryptocurrencies and Forex, there are obvious differences traders should be mindful of. For example, Cryptocurrencies are typically more volatile than fiat currencies such as the USD, GBP and the EUR. The price of cryptocurrencies can fluctuate wildly, even on a daily basis.

The price of BTC, for example, has been known to fluctuate 10% or more within a day. And, since practically all prices of other cryptocurrencies are correlated to the price of BTC, when BTC performs well, the entire crypto market tends to follow and vice versa. Traders should be mindful that while Cryptocurrencies can be popular and profitable, their high volatility can also mean that traders can experience sudden losses.

Moreover, it’s also worth mentioning that there is still significant regulatory uncertainty surrounding cryptocurrency trading and a large number of scams and fraudulent activities have been reported. Accordingly, traders should choose their Cryptocurrency providers wisely and carefully.

Major Cryptocurrency Trading Pairs

Now that we have discussed how Cryptocurrencies relate to Forex, we will mention the major and most-traded Cryptocurrency pairs available on Plus500’s platform. This is important for traders who may want to evaluate the liquidity that is available in the market before choosing their next trade.

Here are the most popular cryptocurrency pairs to trade due to their high liquidity and market capitalization:

  • BTC/USD - Bitcoin (BTC) against the US Dollar is by far the most commonly traded pair. In this instance, BTC is the base, with one BTC expressed in dollars as the quote currency.
  • ETH/USD - Ethereum (ETH) is the second biggest cryptocurrency after Bitcoin. Because of this, it also experiences a heavy trading volume against the US Dollar, with plenty of liquidity.
  • LTC/USD - Litecoin (LTC) is traded against the US Dollar. Litecoin is a coin designed to be faster and more lightweight than Bitcoin.
  • Cardano/USD - Cardano (ADA) also traded against the US dollar, Cardano is the 7th largest Cryptocoin by market capitalization, with over $37 bn in market cap.
  • Solana/USD - Solana (SOL) similar to Ethereum, Solana is a Cryptocoin and a platform that allows the running of decentralized apps.

Plus500 offers CFDs on the above instruments, as well as a unique Crypto 10 Index which follows and measures the performance of the top ten cryptocurrencies in the market, including Bitcoin, Ethereum, Cardano, Polkadot, and more.

Two mobile phones: One showing Bitcoin graph and the other on the Cryptocurrencies screen.

Illustrative prices.

Implications of Cryptocurrencies for Forex

Cryptocurrency trading is still not as common as Forex trading, but traders’ interest in trading cryptocurrencies is steadily increasing due to their high levels of volatility.

Accordingly, if you choose to trade Cryptocurrencies, then you can trade them on the Plus500 platform, which offers a range of CFDs on Cryptocurrencies without having to create a cryptocurrency wallet. On the Plus500 platform, Crypto CFD trading is available 24 hours a day, seven days a week (except for 1 hour on Sundays).

*This article contains general information which doesn't take into account your personal circumstances.

**Instrument availability varies by operator.

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