Cryptocurrency vs. Fiat Currency – What You Need to Know

trading cryptocurrency

Experts believe that cryptocurrency is the future of all currencies. As the world is slowly moving towards a cashless society, many newbie crypto traders are still not sure what the difference between cryptocurrency and fiat currency is. Here are some of the main differences between the two currencies that you should know:

1.    Entry and exit

Some of the crypto exchanges accept regular fiat money like Euros and US Dollars, while others only allow you to use your Bitcoins or other digital assets.

According to the Bitcoin Loophole Review, crypto exchanges accepting fiat currencies make crypto trading easier for newbies in the digital currency industry. So, fiat currencies are easier to use than cryptocurrencies as the exchanges accept both debit and credit cards. Many exchanges also allow wire transfers.

The withdrawal technique is also easier for fiat currencies because once you link your bank account to your fiat wallet, withdrawing money becomes faster.

Cryptocurrency, on the other hand, follows a more extended procedure. You need to buy an intermediary currency such as Ethereum or Bitcoin before you can enjoy the perks of the cryptocurrency exchange. Alternatively, you can open a wallet and then proceed to buy Bitcoins or Ethereum in a peer to peer manner before transferring it to the crypto exchange.

2.    Variety of coins

Entry and exit may be a factor where fiat currencies have the upper hand on cryptocurrencies, but when it comes to the variety of coins, fiat is limited to only a few. Most of the exchanges that accept fiat only offer a limited number of cryptocurrencies.

Also, they take time to add a new cryptocurrency if ever they decide to offer one. However, cryptocurrencies linked to crypto-only exchanges get the facility to deal with a wide range of coins. This improves market capitalization.

One of the main benefits of working with multiple coins is they provide you ample trading options even if the respective digital currencies don’t offer significant liquidity. It hardly takes time for the crypto exchanges to add a new coin to their portfolio as they know that crypto investors are always eager to get their hands-on new coins.

3.    Expertise

What if you don’t have a problem with buying Bitcoin first before transferring it to the exchange and your favorite cryptocurrency appears both on crypto-only and fiat-friendly exchanges? In such a case, what will you choose? It depends on your priority.

If you want to trade your coins, a fiat-friendly exchange is essential as it targets regular payment. The trading platform is more sophisticated with technical indicators and charting tools. But if you want to acquire digital coins only, then a crypto-focused platform is essential. These exchanges are adept at handling forks that you can seize on time.

Apart from these three differences, the transaction fee is another differentiating factor between fiat currency and cryptocurrency. Cryptocurrencies have a lower transaction fee, and that is why it is preferred by most crypto investors. Transferring money using fiat-friendly exchanges often involve multiple service charges that may affect your overall returns from the trade.

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