There are plenty of reasons to trade fiat and cryptocurrencies, with the global forex market seeing more than $6.6 trillion on a daily basis.

Conversely, the crypto market has recently seen its total market value peak at $2.53 trillion, although this is prone to continual and variable fluctuations.

In this post, we'll compare these two investment opportunities, while appraising their main differences and which option is right for you.

What Unites Fiat and Cryptocurrencies?


At their core, fiat and digital currencies serve a similar purpose, as a viable mode of making payments or investing capital.

Similarly, both markets are driven largely by the classic supply and demand balance, meaning that asset prices move higher when the number of potential buyers outstrips those looking to sell.

Conversely, values will diminish in instances where more sellers are active than buyers, although a diverse range of alternative factors can also come into play at this time to have a direct impact on price points.

This piece of deterministic knowledge enables both fiat and cryptocurrency traders to utilise familiar indicators and chart patterns to inform their decisions, while these asset classes can also be accessed seamlessly through an online trading platform.

What are the Differences Between Fiat and Crypto Assets?


Despite these similarities, there are a number of striking differences that exist between fiat and cryptocurrencies, including the number of available assets in play.

While you'll find in excess of 170 international currencies in the forex market, just seven major currency pairs comprise 68% of the market's total trading volume.

Conversely, there are around 12,000 separate crypto assets available to crypto traders, while this number continues to grow on a weekly, monthly and annual basis. This creates a far greater range of choice and flexibility, which can be crucial when looking to build a diversified portfolio in a familiar marketplace.

While both the forex and crypto markets are notoriously volatile, the latter is prone to particularly violent price fluctuations. This year has seen Bitcoin (BTC) soar to a historic high of around $63,000, for example, only to lose more than half of its value in a major slump and subsequently rise once again.

Much of this has to do with the relatively niche nature of crypto and the lack of tangible value associated with tokens. This means that crypto prices are particularly vulnerable to speculation and market sentiment, so it can be hard to predict valuations with any genuine accuracy.

As we can see, there are pros and cons associated with both assets and markets, with international currencies offering a better proposition for slightly more risk-averse traders or novices.

Conversely, crypto assets suit a risk-hungry and ambitious investor mindset, particularly for traders who have knowledge and understanding of this particular marketplace.