For cryptocurrencies, spreads tend to be higher compared to traditional currency pairs. This is primarily due to the higher volatility and lower liquidity found in the cryptocurrency markets compared to the Forex market.
In short: crypto markets are more volatile and less liquid than Forex, so brokers offer wider spreads to mitigate their risk.
Forex vs Cryptocurrency Markets
Factor | Forex | Cryptocurrencies |
Liquidity & Volume | One of the largest and most liquid markets in the world, which helps keep spreads relatively low | Large and growing, but does not yet match the Forex market in terms of liquidity and trading volume |
Risk for Brokers | Lower | Increased risk and lower liquidity mean that brokers have to offer wider spreads to mitigate their risk |
Infrastructure & Market Depth | More established, leading to tighter spreads | Has matured significantly over the past few years, but still faces issues such as fragmented liquidity pools and varying degrees of regulation, which can contribute to wider spreads |