The question everyone has on their mind when speaking about cryptocurrency and the foreign exchange
is does cryptocurrency impact the foreign exchange market or does the foreign exchange market impact
the growth of cryptocurrency? The answer is – it works both ways in a somewhat dysfunctional
It is a well-known fact the global foreign exchange always has some impact on currency trade whether
it’s the American dollar or cryptocurrency valuation but not in the way we are used to and can fully
connect the dots. In truth, if you drill down to the details, the foreign exchange effects block chain
technology the core technology of cryptocurrency. Block chain technology and cryptocurrency are
considered by some to be a significant disruptor of the world economy.
Historically, the balance of trade influences currency exchange rates through its effect on the supply and
demand for foreign exchange. Mainly because foreign exchanges serve as the global center of the
universe for foreign exchanges in currency with traders impacts the financial health of all currencies.
Their respective volatility is weighed, measured all with the aim of making a profit. Hence, when a
country’s trade account does not net zero i.e. exports do not equal imports) it influences the price of
that currency on the world market.
That formula continues today except with cryptocurrency. Cryptocurrency is unique in that its valuation
is not directly impacted by changing market values of foreign exchanges since technology presents
cryptocurrency which in theory is not moderated by the banks or most financial markets. BUT,
cryptocurrencies does penetrate the foreign exchange market according to Forbes Magazine.
Cryptocurrency is considered a major disrupter of the entire financial industry however – foreign
exchange market impacting cryptocurrency is harder to discern.
THEORIES OF GLOBAL FOREIGN EXCHANGE’S IMPACT ON
Money, Inc. states that foreign exchanges can now buy and sell cryptocurrency on official foreign
exchange trading platforms substantiates that the foreign exchange market is assimilating with
cryptocurrency trading boards in a timely and accommodating way. The assimilation theory behind that
process is the global economy in today’s world is interconnected in ways not ever thought of or
perceived 30 years ago. Technically, that means everything that has a financial valuation impacts every
trade exchange one way or the other.
CRYPTOCURRENCY AND FOREIGN EXCHANGE IMPACT
What some people sometimes forget is that much like the cryptocurrency market, foreign exchange is a
market through which trading and investment can take place. That is an elementary and simplistic
explanation of how markets work but fundamentally is easier to understand when assessing if foreign
markets impact cryptocurrency’s growth. Some of the world’s major financial leaders seem to think the
foreign exchange and cryptocurrency impact each other which needs to be assessed and regulated
before cryptocurrency becomes any more disruptive to the global economy.
In fact, in 2017, Christine Lagarde, head of the International Monetary Fund (IMF) was quite clear about
how cryptocurrencies have the potential to disrupt the Central Banking System and to revolutionize the
concept of money. What’s more, she never ruled out that IMF would at some point develop its own
cryptocurrency. However, she was opaque when asked if the foreign exchange devalues or overvalues
There are three major ways, in which the foreign exchange markets can impact cryptocurrency’s growth
and that is as follows:
1) First and foremost in the cryptocurrency market, assets are bought which allow traders to
become the holder of the digital asset. This purchase will be sent to a ‘cryptocurrency wallet’
upon the exchange when can then be transferred to any other ‘cryptocurrency wallet’ with a
private key. Because this holds untold advantages in the foreign exchange market,
cryptocurrencies valuations will increase based upon the versatility of transfers, sells or
2) There may be some foreign exchange markets that decide they will trade cryptocurrencies but
only as a CFD/Derivative. CFD trading enables you to speculate on the rising and falling of prices
of fast-moving global financial markets including shares, indices, commodities, currencies, and
treasuries. Hence, brokers could offer lower transaction fees, if applicable and wanted, based
on their liquidity sources. That being said, this could impact cryptocurrency to have even more
valuation which would impact its overall growth rate.
3) Foreign exchange markets sometimes find factors that regulate and impact cryptocurrency such
as Exchange Traded Funds (ETF’s), and Exchange Traded Products (ETP’s) as off-putting. Since
there would be limited trading hours with the potential effect it would have on the market, this
could also impact cryptocurrency in a negative valuation stance.
Regulators can hugely impact foreign exchanges if they decide to restrain the more ambiguous
cryptocurrency practices but up until now, this keeps being negated due to a challenging counter-push
by the cryptocurrency market for limited regulation interference.
Blockchain technologies seem to be riding the wave right now and have a valuation going nowhere but
up and remember it is block chain technology the core technology for cryptocurrency and block chain
seems to be impervious to impact by the value of cryptocurrency or the value and impact of the foreign
exchange market. At least not for now.
However, cryptocurrencies remain a serious concern for governments who look hard and long at the
cryptocurrency ability to withstand and protect its currency if hacked or someone uses cryptocurrency in
an unethical manner (like when drug lords or sex traffickers use cryptocurrencies’ anonymous source for
their currency). Since both industries are so young, the long-term impact of foreign exchange
regulations on cryptocurrency cannot really be measured yet however, cryptocurrency has stood the
test of some violent price extremes and swings but been able to bounce back at the same or even higher
CAN CRYPTOCURRENCY RETAIN IS VALUE WITH REGULATION?
No one knows if cryptocurrency can retain its value with foreign exchange regulation more
forceful than it is now and it is considered the million dollar question. We do know that despite
regulators best tries, attempts and intentions that cryptocurrencies’ values have remained tied
to optimistic speculation, regardless of the regulation. There is always some short-term impact
on cryptocurrency when regulation winds started to blow in their direction, but nothing long-
term has been sustained.
However, we now have regulations that have been in the queue for a few months yet nothing up or
down consistently and constantly has been noted or recorded that impacted cryptocurrency valuations.
According to Microsoft president Brad Smith: “If you create technology that changes the world, the
world is going to want to govern you; it’s going to want in some measure to regulate you.” Those
regulations will impact foreign exchange markets which by default will influence cryptocurrencies
valuation but no one can seem to land on the same page when speaking about will it impact
cryptocurrency’s valuation long-term? Everyone has an abundance of questions and concerns about the
matter, however, no one has come up with a way to ascertain what degree they will impact
The one consistent plan of action every cryptocurrency investor should have is it is vital to remain
updated, educated and informed about regulation and if it is on the horizon anytime soon and then ask
themselves if they feel optimistic about cryptocurrency valuation remaining the same or even going up?
Remember, so far, the foreign exchange market has not been swayed negatively no matter what
cryptocurrency regulation is passed or is rumored to be coming, at least not for the long-term and at
least not yet.