Let’s go back in time to the late 1990s. Wall Street is still relying on the trusty landline, investors are hunting stock quotes in newspapers’ business sections, while Forex has just discovered the internet. Fast forward to today, and every major financial market is embracing the next big thing – cryptocurrencies.
As a testimony to the meteoric rise of cryptocurrencies, especially Bitcoin, the institutional investors keep rising year after year. This year’s approval of spot Bitcoin ETFs has opened doors for even traditional investors to enter the crypto space. Over the past month alone, Bitcoin ETFs pulled in roughly $2.4 billion in fresh funds.
Retail investors are jumping on board, too. By the end of 2023, 580 million people held crypto assets. While some might see them as chasing the hype, data suggests otherwise. According to Chainanalysis, many of those who invested in crypto during the 2021 boom are still sticking around.
Take, for example, CryptoProcessing, a firm that specializes in providing solutions in the crypto industry. Licensed in Estonia and having 10+ years of experience in the crypto industry, CryptoProcessing has become the go-to solution for businesses that want to onboard crypto payments. The payment gateway supports 20+ popular cryptocurrencies and 40+ fiat currencies.
Impact of Bitcoin Expansion on Forex
What does all this mean for Forex? A surge in retail and institutional investment activity coupled with a regulatory nod from the Securities and Exchange Commission (SEC) signals “institutional maturity” in the crypto market”.
Now, Forex can capitalize on this influx of sophisticated, long-term investors. Besides, these new folks share a lot with Forex’s target demographic: often younger, tech-savvy, and comfortable with taking calculated risks.
Why does Forex onboard crypto?
Forex’s adoption of crypto is in full swing. By late 2022, big Forex market makers like Deutsche Bank, JP Morgan, and Bank of America were all on board with crypto. Brokers are joining too, allowing their customers to fund trading accounts with hot crypto like Bitcoin and Ether. But it’s not just payments — some brokers allow crypto CFDs and trading pairs.
| Crypto service | Offered by |
| Crypto CFDs | FXTM, FOREX.com, Capital.com, AvaTrade, Interactive Brokers, eToro, Oanda |
| Cryptocurrency trading | AvaTrade, Interactive Brokers, eToro |
| Cryptocurrency payment gateways | SimpleFX, Gerchik & Co, XBTFX, Fxview, AdroFx, Sage FX, and 80+ other platforms* |
| Blockchain settlements | HSBC, Wells Fargo, Oanda |
Max Krupyshev, CEO of CryptoProcessing, has his insights on crypto’s growing appeal to Forex businesses.
“Crypto’s volatility, though not ideal for storing your funds, offers unique opportunities for traders. They can make significant profits on its price swings. Younger generations in particular are open to the idea of trading crypto. By letting them use their existing crypto holdings, Forex businesses can snag these new customers before they head over to dedicated crypto platforms,” says Krupyshev.
But onboarding crypto isn’t just about attracting new customers, it’s also about keeping the ones brokers already have. A recent study revealed an interesting trend: over half of retail investors would think about ditching their broker if they didn’t allow trading digital assets.
Crypto Security against Inflation
Crypto can also be used as a shield against inflation — and that’s another reason for Forex to jump in. While volatile, crypto prices tend to move independently of traditional financial markets. Studies have shown that Forex portfolios balanced with crypto weathered the economic turmoil triggered by COVID-19 better than those that were not.
Lower Fees of Crypto
Crypto has operational benefits, too. Compared to traditional transfers, crypto transactions incur lower fees that average around 1%. Speed is another advantage. Standard settlements for most currencies take 2 business days, with a few exceptions. Popular cryptocurrencies settle within minutes or even seconds.
Challenges Remain
Volatility
As a younger asset class, crypto comes with a set of concerns. The biggest one is volatility. Cryptocurrencies can go through wild price swings in a short period, which can be unsettling for Forex traders. Sure, there’s the potential for profits, but there’s also a chance of suffering a loss.
Regulation
Regulation, or the lack thereof, is another hurdle. Out of around 100 countries where crypto has been allowed, only 62 have actual regulations in place.
Conclusion
As crypto expansion continues there is still much hope for the Forex as Europe’s MiCA and the U.S. approval of Bitcoin ETFs suggest that the world might be moving towards more unified and thought-out crypto regulation.
Want to learn more about the impact cryptocurrencies have on Forex? Check out this article on CryptoProcessing’s blog.
