Dramatic price swings and lucrative arbitrage opportunities appear to be attracting former forex traders to cryptocurrency. Some describe the still-young market as being similar to foreign exchange markets of the 1990s.
Crypto Market Feels Like the Early Days of Forex
Forex trading today is a colossal market. In fact, with an average daily transaction volume of more than $6 trillion, it’s the world’s largest.
However, the introduction of electronic trading systems in the late 1990s and increased central bank oversight following the 2008 financial crisis led to the calming of forex markets. Waning volatility and closer spreads made for fewer opportunities to profit.
For trading veterans with an appetite for risk, the cryptocurrency market now represents a new and alluring proposition. Speaking to Bloomberg, Marc Chandler, a chief strategist at Bannockburn Global, commented on forex’s lack of volatility limiting profits. It’s the fact that “cryptos move” that himself and others like him find alluring.
Rob Catalanello, the former head of the electronic trading firm B2C2, said that the Black Thursday Crash was busier than any day he’d witnessed during his two decade career trading Forex. He commented on the “violence” and “unpredictability” of the price swing.
Similarly, Brad Bechtel, of Jefferies LLC, noted how alike the cryptocurrency market of the Forex markets of the 1990s are. Admitting that trading in such conditions can be incredibly difficult, he added that the level of risk put some market participants off.
Although far from conclusive given that few trades are represented on the Bitcoin (BTC) blockchain, on-chain data, compiled by OKEx Insights and reported by BeInCrypto, seems to suggest that the return of market volatility has inspired greater numbers of professional traders into the market.
The number of 100 BTC or more transactions rose dramatically at times of heightened price moves this year. Meanwhile, the number of smaller transactions, largely associated with retail investors, dropped when Bitcoin was at its most volatile.
Forex Traders Switch to Cryptocurrency
Chandler and Bechtel aren’t alone either. Ture Johnson, a Forex veteran with Bank of America Corp., recently pivoted towards cryptocurrency trading. Last year, he joined the cryptocurrency trading platform Floating Point Group.
Having experienced running a trading desk there, he commented that there’s a lot of hedge fund traders looking at the digital asset market right now. He added that it’s the volatility and the potential to profit from it that many find attractive.
Another drawn to the cryptocurrency market from forex trading is Catherine Coley. Now CEO of Binance US, she formerly spent five years at Morgan Stanley Forex desks.
Coley said she’d already witnessed several colleagues move from Wall Street to cryptocurrency. Commenting on how forex markets lack “big risk, big reward” opportunities these days, she added that it was youth of the digital asset markets that she found most attractive.
Given the relative size of the cryptocurrency market compared to that of forex, it’s easy to see the appeal. CoinGecko reports $53 billion in daily trading volume for Sept. 22. Meanwhile, the forex market routinely sees more than $6 trillion in volume.