Trading forex is entirely different from trading bitcoin. If you are a newbie in this field, you must first understand how these activities are different and then make a choice.

Liquidity

The liquidity of an asset is how quickly it can be converted into cash without losing value. It depends on what currency pair you're trading on whether there's a lot of liquidity. The foreign currency trading volume is insane for some of the most popular currencies. There are daily trades worth $2.2 trillion on the US dollar but only €800 million on the euro.

On the other hand, when you buy bitcoin remember that it is less liquid because it is not universally accepted - around $320 million worth of bitcoin transactions were done at the beginning of February. It's not as easy to spend bitcoins as banknotes or cash in your pocket since you can't buy things with them.

Volatility

The volatility of an asset measures how responsive its price is to change. A highly volatile asset goes through a lot of highs and lows quickly.

It's generally more volatile than forex pairs, which move in narrow bands instead of experiencing significant shifts. The high volume of trades every day still causes forex pairs to move a lot within these little bands. While Bitcoin's price fluctuates significantly within a single trading session, it sometimes reaches hundreds or thousands of dollars.

The currency's volatility is caused by a small number of people owning large amounts of bitcoin. Therefore, if a trader with a lot of bitcoin sells shares, the market can flatten. Bitcoin whales are people who own significant amounts of bitcoins, which makes them called 'whales' in the cryptocurrency world.

Risk

The market is relatively new, especially when compared to forex, so many technologies like blockchain are still evolving. Hence, part of the risk of bitcoin trading (apart from volatility) is that you can't predict what will happen.

Hackers can also access coins stored in bitcoin 'wallets' if they find the private access key. All cryptocurrencies have risks because of their technical nature, so bitcoin is no different.

In the forex market, the primary factor affecting the price of a currency pair is the interest rate differential between two currencies. Currency strength is usually associated with countries with higher interest rates, and high-interest rates cause a country's currency to appreciate because foreign investment drives up demand for it.

Further, the forex market works the same way as other OTC markets. The forex market doesn't have a lot of counterparty default risks, but they are still possible - especially if a brokerage firm defaults.

There are always risks involved with trading, but you can manage some of them with stops and limits when you use a CFD account.

Regulation

Bitcoins and forex don't have a central authority to regulate market transactions. The forex market is mostly OTC, but heavily regulated banks handle most daily FX trades. For example, the Federal Reserve (Fed) monitors for signs that banks and institutional investors are manipulating interest rates; the Bank of England (BoE) does the same.

As part of Bitcoin's blockchain network, transactions are verified by other participants. An intergovernmental or central bank doesn't regulate bitcoin transactions. As a result, if bitcoin buyers get hacked or exploited, they can't get their stolen coins back. Safeguards are in place to protect funds if they get robbed in forex trading, but banks don't have to.

IG has been regulated by the FCA, a regulatory framework for CFDs. Your money is protected if anything happens to IG because it's in segregated client accounts at regulated banks.

Accessibility

Forex is more accessible than bitcoin because you can trade it directly through a broker, and more players are on the market to take your side. A wallet and exchange account is needed to trade bitcoin, which is less liquid. Often, you can only deposit a certain amount, and maintenance can be expensive.

However, you can trade CFDs to speculate on forex and cryptocurrency price movements without owning them. With IG, you can open a leveraged account in minutes and start selling immediately.

Bitcoin vs. Forex: A summary

When you understand how cryptocurrency and forex trading differ, you'll understand online forex trading better. You can diversify your portfolio a lot by trading currencies and foreign exchange.