Crypto and Forex trading have both become a very popular activity in the world. The last decade was a resurgence of these fields and people took advantage of the benefits that they present. Even though it is very hard to master trading, with proper knowledge and hard effort everything is possible.
Africa has long been a state which demonstrated a number of unique innovations regarding technology. Crypto hubs as well as forex trading are flourishing in the region and numerous countries are already showing their success. But for most of the countries, crypto is considered advantageous over Forex and in this article, we will talk about the reasons why it garners such huge attention from African citizens.
One of the main advantages of crypto is the fact that, unlike the traditional financial market, the cryptocurrency market is devoid of many restrictions. So, it differs from the securities market that it works around the clock, does not have big barriers to entry, and the commissions remain relatively small. Since this market operates 24 hours 7 days a week and without interruptions, there is no need to close positions at the end of the trading day or week.
In Forex traditionally everything is 24/5 and Africans did not find it attractive. According to TopForexTradingBrokers this fact is sometimes very annoying for traders not only in Africa but in the whole world as well.
Low investment for entry
To enter a foreign exchange market, an investor must have a solid deposit, which is a problem for new traders. Even more, capital is needed to enter, for example, the securities market (the American market requires several tens of thousands of dollars). For crypto trading, the minimum possible order is relatively small (usually ranges from 0.0005 to 0.001 Bitcoin and depends on the rules of the particular exchange).
Lack of correlation with other assets
Cryptocurrencies also differ in that they practically do not correlate with the assets of the traditional financial market. Moreover, during periods of downturns in global indices, buyers often become active in the digital currency market. Thus, more and more people see a “safe haven” in Bitcoin to preserve capital during periods of economic instability. In recent years, even proponents of a conservative approach to investing are looking more and more for opportunities to diversify their cryptocurrency portfolio and at the same time increase its profitability.
Many experts in Africa scold the cryptocurrency for its volatility. However, significant fluctuations in price, on the contrary, attract crowds of traders to this market.
It’s no secret that digital assets are much more volatile than fiat ones. The latter are traded on the Forex market for the most part with leverage. For example, when trading a pair of liquid currencies, say EUR\USD, volatility will reach 2–5% per month. Such small fluctuations in price make it necessary to use borrowed funds in trading.
The trick of cryptocurrencies is that they can be successfully traded on the spot market without using leverage and, accordingly, stop orders, margin requirements, leverage commissions, and additional risks.
Daily volatility of Bitcoin can reach 5, 10, and even more percent per day, which is very attractive for an African trader.
While crypto seems to be advantageous over Forex in Africa, we should not ignore the benefits that the latter can offer to people in the world. But considering the nature of cryptocurrencies and especially Bitcoin it is not surprising why African traders look at them more actively and thoroughly than at foreign exchange markets.