Cryptocurrencies have established themselves as a viable alternative asset class, with institutional adoption from JPMorgan, BNY Mellon, KPMG, and a slew of other firms.

With so much depth and diversity, they’ve proven to offer a plethora of investment and trading opportunities, with an increasing number of traditional traders turning to crypto.

According to a recent report by Acuiti, proprietary trading firms are expected to leave the forex market in droves this year due to monetary policy uncertainty. Only 12% of the companies polled said they saw “big potential” in this asset class in 2022, while over one-third said they saw “very little potential” for profits.

On the other hand, despite the rocky start to 2022, crypto markets are heating up, with many proprietary trading firms citing “huge potential” in the year ahead. As a result, the crypto markets are on par with equities and interest rates as markets to keep an eye on. Let’s look at some of the reasons why cryptocurrency trading is becoming so popular.

1. INEFFICIENCIES IN THE FOREX MARKET

Despite its massive leaps from its early days as the “Wild, Wild West” as an asset class, cryptocurrency is still in its infancy. In comparison, the forex and futures markets have taken centuries to develop. Emerging markets offer traders a plethora of opportunities because they lack the established processes and stringent regulations that prevent traders from profiting from arbitrage opportunities in established financial markets.

Market inefficiencies persist even as the space matures, infrastructure is increasingly built to an institutional standard, and regulators establish clearer frameworks. This means that traders can buy and sell cryptocurrencies on a variety of exchanges and trading platforms, then sell them for a higher price on other platforms to profit from the spread.

Traders can do this continuously and effortlessly using algorithms or bot trading, often buying assets at low prices and selling for a profit in Asian markets, where Bitcoin (BTC) is often at a premium.

The difference in BTC prices in South Korea compared to other foreign crypto exchanges is commonly referred to as the “kimchi premium.” The premium hit an all-time high of over 20% in May 2021, providing traders with an unrivaled opportunity to profit from arbitrage.

During times of global unrest, such as the 2019 Hong Kong protests, the same is often true. Traders are usually prevented from profiting from such simple profit-making opportunities due to the maturity of markets like forex.

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2. VOLATILITY IN CRYPTO IS DESIRABLE

The volatility of cryptocurrency is well-known, with prices fluctuating dramatically from second to second. In a matter of hours, prices can rise or fall by more than 20%. While high volatility may deter some investors, it may appeal to short-term traders who can profit by longing or shorting the market regardless of whether the price rises or falls.

Day traders and swing traders can lock in profits using futures or perpetual swaps by taking a position for or against the market, making crypto trading a veritable gold mine.

While equities have been volatile recently, with Amazon’s stock surging 13.5 percent in one day and Meta’s profits plummeting 22%, traditional markets rarely experience this level of volatility. As a result, crypto trading provides fiat traders with numerous opportunities to earn thousands of dollars per day by simply trading its volatility. There’s also the possibility of maximizing profits by using leverage to boost gains.

3. TRADING IN CRYPTOCURRENCY 24 HOURS A DAY, 7 DAYS

Cryptocurrencies, unlike traditional markets, never sleeps, with trading opportunities available 365 days a year, 24 hours a day. Of course, for traders who want to be more active in different time zones, the downside can be unsociable hours. However, by using tools like limit orders and stop losses, traders can ensure that their positions in volatile markets are never liquidated for more than they can afford to lose while they sleep.

Furthermore, cryptocurrencies are a global currency, which means that traders can trade them on a variety of platforms all over the world. As a result, cryptocurrency exchanges have been forced to improve their offerings.

4. MARKET MATURITY AND INCREASED CRYPTO REGULATION

Another major factor contributing to the space’s increasing institutionalization is the improvement of standards across the board. With their cumbersome infrastructure, frequent outages, and wide price swings, the cryptocurrencies market used to offer even more opportunities for easy profits. However, these practices are now being widely reduced.

Proprietary traders are now able to operate in this market that was previously unattainable due to regulatory burdens as clearer regulation emerges, weeding out opaque practices.

5. GLOBAL FACTORS AND INFLATION DRIVE AN INCREASE IN THE USE OF CRYPTO

Global economic factors are having a significant impact on traditional markets, according to an Acuiti report. With inflation at record highs and yields hovering around zero, investors are increasingly looking for alternative assets, abandoning forex in favor of cryptocurrency.