The world of finance in Trinidad and Tobago has seen significant transformations in recent years, with crypto currency and forex emerging as two prominent investment options. Crypto currencies, like Bitcoin and Ethereum, have taken the financial markets by storm, while forex, the foreign exchange market, remains a traditional and widely traded arena.
Although crypto currencies are often confused with forex in T&T (if you mention crypto currency people will often say "ent that's the forex trading thing"). However, crypto currencies are one of the furthest things from Forex. Crypto currency were originally created to replace forex, specifically fiat (Physical cash like TTD or USD), due to United States Government's 'abusive' monetary policies, like printing money more money during the 2008 great recession.
In this blog post, we will delve into the world of crypto currency and forex, exploring their definitions, and thoroughly examine the advantages and considerations of both markets from the perspective of a Trinbagonian. By doing so, we aim to provide you with valuable insights to assist in determining which market aligns more effectively with your investment preferences.
What is Crypto Currency?
Crypto currency, are decentralized digital currencies that use cryptographic techniques for secure transactions and control the creation of new units. The most famous among them, Bitcoin, was introduced in 2009, and since then, thousands of alternative cryptocurrencies have emerged. Some, like Ethereum, serve as platforms for decentralized applications, while others have specific use cases, such as Ripple's focus on cross-border payments.
What are the Benefits of Crypto Currency?
1. Higher growth potential: Crypto currency only has around 1.2 Trillion dollars invested into it(as of July, 2023), while forex has 2.4 Quadrillion (24000 Trillion) dollars invested. That is almost 2000x the amount of money in forex as compared to crypto. Even other assets such as gold have smaller growth potentials as there are around 12 trillion dollars invested into gold.
2. Decentralization: Due to the lack of control by any one central entity, the is no reliance on or any control by any single entity. This allows you and other market participants to freely invest into crypto currency without anyone to prevent you or put restrictions on you.
3. Diversification: The vast array of crypto currencies available provides investors with ample diversification opportunities as there are thousands of different crypto currencies many with different functions.
4. Ease of investing: Crypto currency can be a very simple and straightforward investment tool as all you need to do is purchase crypto currency such as stablecoins and then swap that stablecoin for a crypto currency and then hold it for as long as you want.
If you want to learn how to buy crypto currency please read our "Getting Started with Bitcoin in Trindad and Tobago".
What are the Concerns of Crypto Currencies?
1. Volatility: The prices of crypto currency are highly volatile, leading to significant price fluctuations and potentially substantial losses.
2. Regulatory Uncertainty: The regulatory landscape surrounding crypto currency varies widely across countries, leading to uncertainty and potential legal risks for investors. In Trinidad and Tobago, many financial institutions refuse to service customers that may have obtained many via crypto currency or wish to obtain crypto currency, thus causing investors to rely on more potentially dangerous practices to buy and sell crypto currency.
If you're looking to sell crypto currency safely please read our "How to Sell Crypto Currency in Trinidad and Tobago" guides.
3. Security Risks: The digital and decentralized nature of cryptocurrencies makes them susceptible to hacking and theft if not stored and managed securely, especially since you have the ability to self-custody your own wallets.
What is Forex?
Forex, short for foreign exchange, is the global decentralized market where currencies are bought, sold, exchanged, and speculated upon. It is the largest and most liquid financial market in the world, with trillions of dollars traded daily. Forex trading involves the exchange of one currency for another at a pre-determined exchange rate.
What are the benefits of Forex?
Liquidity: The high trading volume in the forex market ensures that investors can easily enter and exit positions without significantly impacting prices.
Accessibility/ Regulation: Forex trading is supported in Trinidad and Tobago by financial institutions unlike Digital Assets, however it can sometimes be like pulling teeth when trying to get money into your bank accounts from foreign brokerages that you may have deposited money into.
Less volatile: Forex markets have significantly less volatility than Crypto Currency markets making it a debatably more safe market when trading as compared.
