Cryptocurrency volatility attracts a lot of traders looking to convert price fluctuations into profitable deals. Nevertheless, many traders still prefer to speculate on the price of traditional assets, mainly foreign exchange (forex) pairs. The daily turnover of the global forex market hit $7.5 trillion in April last year, according to data provided by the Bank for International Settlements (BIS), making it by far the largest market out there.
Thanks to leveraged trading platforms, crypto enthusiasts can get synthetic exposure to this vast market directly on-chain. Some of these decentralized venues enable users to trade a wide range of asset classes, including crypto, forex, stocks, bonds and commodities. While the price moves of most Forex pairs pale in comparison to the wild fluctuations of crypto assets, traders can benefit from the leverage feature to multiply potential gains, although they should be ready for higher risks.
Here are some of the reasons why many traders prefer decentralized leveraged forex trading:
- Forex experience — many crypto traders have embraced digital assets after polishing their skills in traditional markets like forex. Given their accumulated experience over the years, these traders don’t want to waste their talent and continue to trade Forex pairs while taking positions on crypto assets as well. This is a great mix of two markets often showing low correlation, which can help traders consolidate their diversified approach.
- Stability — forex pairs, especially majors, are significantly more predictable and stable compared to cryptocurrencies, most of which follow the performance of Bitcoin. While institutions, especially commercial banks, dominate forex trading, there are usually no whales that can single-handedly manipulate the market. Compared to crypto assets, forex pairs seem to move in slow motion, and trading without leverage wouldn’t even make sense. On a normal day, risk-averse traders prefer forex over crypto.
- Fundamental analysis — forex pairs, especially majors, are sensitive to macroeconomic factors as well as political and economic events, which enable traders to benefit from a sense of predictability that is less obvious in the crypto space. Many strategies involving the analysis of scheduled events can be lucrative in forex.
Forex traders go DeFi
Many traders who favor traditional assets still prefer to trade on-chain. Blockchain offers some unique benefits that can improve the trading experience.
One of these decentralized leveraged trading platforms is gTrade, which was developed by decentralized finance (DeFi) project Gains Network.
gTrade hosts multiple cryptocurrency pairs, but traders can also get synthetic exposure to traditional assets, including forex pairs, commodities, stocks and exchange-traded funds (ETFs) that track major indexes.
Thanks to gTrade, users can trade crypto and Forex from a single platform that also has a user-friendly interface and many built-in features.
gTrade hosts derivative-like synthetic products tracking the price of Forex majors, minors and exotic pairs based on reliable price feeds that leverage Chainlink’s decentralized oracle network. The decentralized leveraged trading platform initially launched on Polygon and has recently arrived on Arbitrum — two of the most popular layer-2 scaling solutions on Ethereum.
gTrade supports over 80 trading pairs, and weekly volumes often surpass the $1 billion mark across Polygon and Arbitrum. Liquidity is provided by the gDAI vault, a yield-bearing vault that contains a tokenized version of DAI and acts as the counterparty to all trades made on the platform.
Cryptocurrency and forex pairs are two of the most popular asset classes on gTrade, followed by stocks and indexes.
Source: Dune @unionpro
Open interest in forex pairs often surpasses the volume of open positions in crypto products, suggesting the increased interest in forex trading on-chain.
The benefits of trading forex on-chain
There are several reasons why Forex traders choose to open positions on-chain:
- Decentralization — unlike traditional forex brokers, blockchain technology’s decentralized nature ensures no central authority or intermediary has control over the transactions. Even worse, the majority of brokers trade against their clients. Trading on-chain gives users full control over their assets, as they can transact directly with each other without the need for a middleman. This makes the transactions faster and cheaper.
- Transparency — blockchain technology provides a transparent and immutable record of all transactions. This makes it easier for users to track and verify their transactions, which reduces the risk of fraud or manipulation. Leveraged trading platforms can benefit from reliable oracles such as Chainlink to get accurate price data that is visible to all users.
- Security — blockchain technology is highly secure due to its decentralized cryptographic protocols. Even Layer-2 solutions like Polygon and Arbitrum are decentralized enough to ensure that there is no single point of failure, making it difficult for attackers to manipulate the network or steal user assets.
- Convenience — crypto enthusiasts can get exposure to digital assets and forex pairs from a single platform, making it easier to diversify their trades and monitor trading performance. Also, there is no need to pass KYC verification.
Decentralized leveraged forex trading is gaining traction among crypto enthusiasts thanks to the stability of the world’s largest market, applications of fundamental and technical analysis, and the opportunity to diversify the exposure to digital assets. What’s more, platforms like gTrade bring forward new and diverse trading opportunities that attract more traders and help introduce more users to the crypto space.