Both cryptocurrency and forex markets have become more linked with each other over the past years and have grown far more than previously. They have bounced off each other over the past year, and their links and bonds are not to be taken lightly.
Trading Volumes
Forex has a daily trading volume of around $6.6 trillion, and even though crypto is comparatively far younger than forex, it still boasts trading volumes of up to $45 billion. These are figures which are not to be taken lightly.
For example, trading pairs such as bitcoin and the US dollar have increased in popularity on the cryptocurrency exchanges, and the forex broker services show great interest.
The collapse of the FTX Crypto Exchange
With the recent vast and publicly reported collapse of the FTX crypto exchange, some flaws have been discovered, which has increased the level of alert of traders and investors alike. The failure was due to suspicious and fraudulent activity, resulting in huge losses and significant funds disappearing. It was reported that several (at least thirty) billionaires who had made significant investments in cryptocurrency had lost vast sums of money. The resultant case is ongoing into 2023 and possibly beyond but has quite understandably rocked the markets.
Value of bitcoin drops
Going back to the start of December 2021, bitcoin value had started to drop from its all-time high value – a drop of around 15-16% and this was just the beginning of a steep downward trend that continued throughout the year 2022. This low decline lost bitcoin even more during 2022, up to 70% of its value, on top of the initial drop at the end of 2021.
Cryptocurrency value decline
Most interestingly, during the decline in the value of cryptocurrencies, the forex and cryptocurrency markets remained at their most interlinked and intimate. While cryptocurrency values were falling, there was a link to a fall in prices and investors pulling back from riskier assets primarily linked, but not exclusively, to economic uncertainty caused by Russia’s invasion of Ukraine.
Drop in asset prices.
There has also been a broader asset drop since Covid, partly because of the ‘pandemic hangover.’ This is easily demonstrated when companies such as Zoom and Netflix’s stock prices rose exponentially during the lockdown but rapidly dropped during 2022, and now the lockdown is over. But cryptocurrencies have fallen even further during this time, even though the broader opinion is that cryptocurrency will bounce back.
Here to stay
Cryptocurrency is not going to go away and prices, although it may take a few years, will stabilize and rise again. There are an increasing number of forex brokers with a crypto deposit option which allow traders to fund their trading accounts with bitcoin. With transactions remaining quick, easy and relatively cheap to carry out, this will only encourage more to get onboard.
The collapse of the FTX has caused significant fallout and alerts with crypto traders and investors alike, resulting in the very downcast year of 2022. Still, experts predict that crypto will rise again.
