Cryptocurrency trading and FX (foreign exchange) trading are two different activities, but some similarities exist.
Cryptocurrencies are digital or virtual tokens that employ cryptography to verify and manage the creation of new coins. Bitcoin was the first cryptocurrency to be developed in 2009.
Cryptocurrencies are decentralised, thus they are not governed or regulated by a government or financial institution. The goal of continuous trading is to make money by buying and selling currencies in order to profit from currency fluctuations.
One similarity between crypto and FX trading is that both involve buying and selling assets. Another similarity is that both can be risky ventures with no-return guarantee.
Differences between the two types of trading
First of all, cryptocurrencies need to be mined, which means they require sophisticated software and a vast amount of processing power to decrypt algorithms before you can use them.
Cryptocurrencies also have an advantage over physical currencies in that you can transfer them around the world almost instantly for meagre transaction fees.
In addition, owning cryptocurrencies does not mean ownership of any asset beyond the value itself, which is one thing that differentiates it from FX trading in Dubai.
On the other hand, FX trading involves trading with real currencies such as the UAE dirham or US dollar. You own part of another nation’s economy or business when you invest. It’s one way to diversify your money and protect it.
Trading foreign currencies also have the advantage of not being affected by inflation like local currency units, which makes them more valuable over time.
Although FX trading offers more safety than cryptocurrency trading because it trades with tangible assets, both types of trading can be risky. It is possible to lose all your investment through either means if you don’t know what you are doing.
To ensure this doesn’t happen:
- Ensure you know how to trade before opening an account with a forex broker or crypto exchange.
- Learn as much as you can about cryptocurrencies and their complexities before committing any money towards investing in them.
- Check for brokers that have been authorised by regulatory bodies such as the Emirates Securities &Commodities Authority in Dubai.
Advantages of crypto trading and FX trading
Cryptocurrencies are digital or virtual assets that use cryptography to verify and secure transactions, as well as create new ones.
Cryptocurrencies are not controlled by governments or financial institutions, which makes them more difficult to regulate than traditional currency. FX trading is the practice of buying and selling currencies in order to profit from changes in price.
One similarity between crypto and FX trading is that both involve buying and selling assets.
Another similarity is that both can be risky ventures with no-return guarantee.
10 Fun Facts about Cryptocurrencies in Dubai
- Cryptocurrencies are legal in Dubai.
- The Dubai government is supportive of cryptocurrencies and blockchain technology.
- The UAE Central Bank issued a warning against investing in cryptocurrencies, but this did not stop the Dubai government from continuing its support.
- The first Bitcoin exchange in the Middle East opened in Dubai in 2013.
- Several startups in Dubai are working on innovative cryptocurrency projects.
- In 2017, a company in Dubai became the first in the region to offer salaries in Bitcoin.
- The Dubai International Financial Centre (DIFC) announced plans to launch a cryptocurrency exchange in 2018.
- The UAE is planning to launch its cryptocurrency called emCash.
- Cryptocurrencies are being increasingly used in Dubai for payments and trading.
- Dubai is quickly becoming a global centre for cryptocurrency innovation and adoption.
When trading with cryptocurrencies or FX, you can always consider opening your trades in options contracts to protect yourself against losses.
If you are dealing with Dubai based brokers, sign up to trade bitcoin Dubai.
They provide free tips and advice on using options for trading purposes, including cryptocurrency trading.
If you open a call (to buy) contract, the seller is obligated to sell if the buyer decides to exercise his right back; this gives you legal ownership of the asset at a set price.
If you short (or write) an option, you would be obliged to purchase it at a fixed price regardless of whether the market moves up or down.