When it comes to growing your passive income stream, there are many ways to go about it.

You can go the traditional route and put capital into domestic stock options and exchange-traded funds from your local stock exchange. This investment technique can reap decent profits, but it’s comparatively slow-moving and stable.

On the other hand, if you’re willing to indulge in some risk and dig a little deeper, then you can consider investing in the Forex market or cryptocurrencies. Forex stocks are similar to domestic stocks in that they’re highly liquid and regulated. Forex trading mostly revolves around trading currency pairs in large volumes called lots.

Cryptocurrencies, on the other hand, are decentralised digital assets that are speculative by nature. Crypto tokens hold the same value regardless of ownership and where the investor is geographically located. The governing and regulatory landscape surrounding crypto differs greatly in crypto trading too.

If you’re considering investing in either of these scenes but are unsure where to start, then read on. We’ll dive into the differences between investing in Forex and crypto—and which investment strategy is ideal. Let’s jump right into it.

Trading Hours

People can trade in both the Forex market and crypto market during open trading hours. However, the timing for trade availability is a bit different for each.

In the crypto space, investors can trade 24 hours a day, 7 days a week as the market has no downtime. The market never closes to anyone, even on weekends and holidays. Investors can be buying BTC at 3:00 AM EST and be able to sell it all the way until 2:59 AM EST the following day—and any time following that period.

Conversely, the Forex market is not quite 24/7. From Monday to Friday, it remains open 24 hours a day. But on some parts of the weekend, trading most currency pairs is completely restricted.

Forex operates across four major trading sessions, namely, New York, Tokyo, Sydney, and London. Each post opens from 7:00 AM to 5:00 PM in their respective timezone. When one trading session closes, another is typically open, thanks to the global time zone differences.

When any of these trading posts are open, brokers and traders can continue trading in the Forex market. However, trading hours are closed from Friday 5:00 PM EST to Sunday 5:00 PM EST.  Brokers may grant trading access on weekends for exotic currency pairs, but these come with the drawback of not being as liquid due to the decreased trading activity during these times.

If you’re deciding the best option among the two, trading hours play a fairly minimal role in influencing that decision.

Forex offers more predictability with stops during the weekend, but with round-the-clock trading on the weekdays, this trading timetable is like a hybrid of crypto’s 24/7 trading and the stock market’s weekday open hours.

Market Structure

Another key difference between Forex and crypto is its market structure. The regulating bodies overseeing these respective markets have different control over the market.

On the Forex side of things, brokers, financial enterprises, and central banks hold most of the responsibility for influencing the stability and liquidity of the asset.

Trading typically occurs on an interbank system rather than a public exchange, making intermediaries a necessity for individuals looking to enter this trading type.

The price movements in Forex are also directly influenced by government policies and developing economic trends, like new interest rate changes. It’s rare for Forex trading to plummet due to the institutional backing of governments and regulatory bodies around the world.

Conversely, the crypto market has no central authority governing it, as it purely operates on a peer-to-peer network. Government authorities in different countries can impose regulations and taxation on their citizens, but they can’t control the flow of the market at will.

This financial autonomy and open accessibility is the first of its kind in the grand financial landscape, and it can be appealing to different groups of investors depending on their individual risk tolerance and financial goals.

Price Fluctuations and Volatility

One of the major differences between Forex and crypto investing is the volatility of their underlying price movements. Forex trading is typically seen as more stable, safe, and reliable, whereas crypto trading is known for its extreme price fluctuations.

Forex currency pairs have an extremely low chance of experiencing drastic price swings. Day-to-day averages typically fall anywhere between 0.5% to 1%, if not lower. Only major world events, like a war, interest rate changes, civil unrest, or a controversial political event, can cause prices in currency pairs to move by more than 1%.

On top of that, Forex prices are also overseen by central banks and governing bodies. They actively work towards regulating and stabilising Forex prices, making their respective currency a reliable and competitive one in the global field.

On the other hand, cryptocurrency assets—except for stablecoins—are prone to experiencing large swings in price. This is especially true for low-spread altcoins, where it’s not unusual to see top or bottom performers skyrocket or plummet by more than 30% on a given day. However, on average, top crypto prices move by 3-5% daily.

As previously mentioned, no governing body controls crypto in its entirety—meaning there are no automatic safeguards in place to prevent someone from losing out a big portion of their money unless they set up a stop-loss feature.

Crypto prices shift rapidly based on market sentiment, speculation, and even global macroeconomics. The right crypto token investment at the right time can help investors strike gold, but there’s also a high chance of investors losing out on money.

That said, many top tokens have achieved a level of stability that’s similar to stock market prices. In any case, it’s important to do your research before investing in a crypto token.

Furthermore, ask yourself this when deciding between Forex and crypto: are you willing to take a chance with a crypto that has a slim chance of rising in value? Or do you prefer the reliability and steadiness of a government-backed asset? Your follow-up answer will enlighten you on how to proceed with your next steps.

Market Size

While the crypto scene has dramatically risen in popularity over the past years and has gained headline-worthy attention across multiple media outlets, the market size of Forex markets beats it out in terms of market size several times over.

To illustrate, the daily trading volume of the Forex market is over $7 trillion. The entire market cap of cryptocurrency doesn’t even reach that amount. This makes Forex trading the most lucrative and active financial market in the world, beating even stock exchanges.

Furthermore, currency pairs like EUR/USD and GBP/USD are very liquid currencies. They can undergo a handful of billion-dollar trades without impacting the broader market of either currency.

On top of that, central banks and financial institutions also play a role in ensuring that currency pairs remain liquid and viable amidst dynamic market and economic conditions.

On the flip side, crypto’s market size is noticeably smaller. While it experiences daily trades amounting to hundreds of millions of dollars, it doesn’t (and likely won’t ever) even come close to matching Forex’s liquidity.

Furthermore, much of the liquidity of crypto is clustered in the top-performing coins like XRP, Ethereum, and Solana. USDT—a US dollar-backed asset—is also a top 5 crypto token, highlighting the reliance on fiat currency in the crypto space.

Unless more commercial spaces on a global level accept Bitcoin and crypto as a valid form of currency, fiat and Forex will continue to dominate the markets.

Regulation and Safety

Regulation is a key differentiator between Forex and crypto trading. Forex trading, as mentioned earlier, is backed by central banks and financial authorities. There are various policies in place to keep traders safe and to prevent fraud from occurring.

Furthermore, brokers and financial professionals are also required to have licenses to be able to work in this field, making it highly restrictive and controlled for the consumer’s benefit. Furthermore, currency regulations are well-established and rigorously enforced within the financial system—and it’s not uncommon for people to get sentenced to jail time if they get caught cheating the system.

Crypto trading, on the other hand, is governed in different ways depending on the nation addressing it. Some countries outright ban cryptocurrency trading, like China, Pakistan, and the United Arab Emirates. Others receive it positively and are imposing regulations on it over time, like the US and the European Union.

That said, crypto trading is still a battleground for many illicit activities, like scams, pump-and-dump schemes, fraud, and phishing attempts. When an anonymous hacker gets ahold of your coins, tracing them back can be nearly impossible if they don’t leave a digital footprint behind their wallet. In that regard, Forex is a much safer and regulated market for investing purposes.