Navigating the impact of digital currencies on forex markets

23 July 2024

 

The financial landscape is undergoing a seismic shift with the advent and increasing adoption of digital currencies, and as they gain traction, their influence on traditional foreign exchange (forex) markets is becoming more pronounced.

This transition presents both challenges and opportunities for traders and investors, particularly in markets like the UAE, which are rapidly evolving.

The integration of digital currencies into traditional forex markets is already reshaping the financial landscape. For traders and investors in the UAE, this transition necessitates a strategic approach to navigate the volatility, manage risks, diversify portfolios and address liquidity issues effectively.

Digital currencies are characterised by a high degree of volatility and can fluctuate within short period of time. This is unlike traditional fiat currencies, which tend to experience gradual value changes influenced by macroeconomic factors.

Market sentiment can have a significant impact, especially on the less liquid digital currencies. Bitcoin, the most well-known digital currency, has seen its value swing wildly, driven by market sentiment in relation to regulatory news and market developments.

High volatility is a double-edged sword – it carries opportunities, but also amplifies risks. It also creates opportunities, and traders leveraging technical analysis and quick decision-making can capitalise on price swings.

Disparities in liquidity across different exchanges can create arbitrage opportunities for savvy traders, but this requires a high level of research, resources and technical knowledge to be adequately exploited.

Digital currencies can also serve as a hedge against fiat currencies.

In the UAE, where the dirham is pegged to the US dollar, digital currencies can be a means to hedge against dollar exposure. At the same time, the volatility can also expose traders to significant losses, so managing this risk requires sophisticated strategies and tools.

Managing risk

The relative novelty of digital currencies means that they can be subject to speculative bubbles, making it challenging to predict long-term value trends.

Effective risk management is therefore crucial when dealing with digital currencies. The high volatility and 24/7 nature of digital currency markets require traders to adopt robust risk management practices, including the traditional tools that more than ever are key to protection and success.

Implementing stop-loss orders helps to limit potential losses by automatically selling a position when it reaches a predetermined price. Proper position sizing ensures that a single trade does not disproportionately impact the overall portfolio, mitigating the risk of significant losses.

When it comes to using such tools in digital currency trading, traders need to factor in that considerable gaps might form between prices and the available liquidity, making it difficult to trigger stop-losses at the desired prices. Therefore, the position sizing should be determined accordingly.

Another aspect to be considered is the relative lack of historical data: unlike traditional forex markets, digital currencies lack extensive historical data, making it harder to apply conventional risk models.

Even the data set of the most established digital currencies, like Bitcoin or Ethereum, which have a longer history, are to be analysed with caution as the older data refers to a completely different market in terms of liquidity, volume of transaction and actual status of the asset.

Additionally, while major digital currencies like Bitcoin and Ethereum enjoy increasingly higher levels of liquidity, many altcoins suffer from low trading volumes.

Low liquidity in certain digital currencies can lead to significant slippage, where trades are executed at prices different from those expected.

Furthermore, the regulatory environment for digital currencies is still evolving, meaning that unexpected regulatory changes can significantly impact market dynamics and trader positions.

Ensuring the use of reputable exchanges with robust liquidity is essential.

UAE potential

The UAE has shown a progressive attitude towards digital currencies, positioning itself as a hub for blockchain innovation and digital asset adoption.

The government’s proactive stance, coupled with a robust financial infrastructure, creates a healthy and reliable environment for integrating digital currencies as an asset for investment portfolios and trading.

The UAE has established comprehensive regulations to govern digital currencies, enhancing market integrity and investor protection. This regulatory clarity attracts global investors and fosters confidence in digital currency markets.

The involvement of institutional players in the UAE – such as banks and financial institutions – in digital currency markets is also set to grow, and this institutional interest will bring additional liquidity and stability and help mitigate some of the volatility and liquidity issues.

The UAE’s infrastructure supports digital currency transactions and innovation, and this is crucial for the efficient functioning of digital currency markets and their integration with traditional forex trading.

In approaching digital currency for trading and investment, it is crucial for traders to understand the characteristics of the various currencies and ensure that exposure is in line with the investors’ risk appetite and tolerance.

As digital currencies continue to evolve, staying informed and adaptable will be key.

The UAE’s supportive regulatory environment and technological advancements position it well to leverage the benefits of this shift while mitigating the associated risks.

By embracing these changes with a well-rounded strategy, traders and investors can leverage the potential of digital currencies to enhance their trading and investment outcomes.

https://image.digitalinsightresearch.in/uploads/NewsArticle/12177946/main.jpg
Related Articles
  • Contractors compete for Riyadh airport Terminal 6 work

    2 November 2026

     

    Contractors are preparing bids for the main construction contract for Terminal 6 at King Salman International airport (KSIA) in Riyadh.

    MEED understands that the consortiums have been given until January to submit their proposals.

    The participating consortiums are:

    • Al-Gihaz Holding / TAV Construction / Webuild (local/Turkiye/Italy)
    • Modern Building Leaders / Powerchina / Metallurgical Corporation of China (loca/China/China)
    • UCC Holding / Consolidated Contractors Company (Qatar/Greece)

    Last month, MEED exclusively reported that contractor teams have completed the early contractor involvement phase of the project.

    Under the completed phase, the shortlisted teams submitted detailed construction methodologies and technical design proposals.

    King Salman International Airport Development Company (KSIADC) is a subsidiary of Saudi sovereign wealth vehicle the Public Investment Fund.

    Terminal 6 is planned to boost the airport’s annual capacity by 40 million passengers. KSIADC aims to complete the terminal ahead of Expo 2030 Riyadh.

    In May 2025, MEED reported that US-based Bechtel had been appointed as delivery partner for the passenger terminals at KSIA.

    UK-based Foster + Partners designed the masterplan, including the terminals, six parallel runways and a multi-asset real estate district.

    US-based engineering firm Jacobs is providing specialist consultancy services for the masterplan and runway design, while UK-headquartered Mace is acting as delivery partner for the broader development. Local firm Nera secured the airspace design consultancy contract.

    The KSIA project covers about 57 square kilometres (sq km) and incorporates the existing terminals at King Khalid International airport. The scheme will feature 12 sq km of airport support facilities, residential and recreational zones, retail assets and logistics parks.

    The development is targeted to handle up to 120 million passengers a year by 2030 and 185 million passengers by 2050, in addition to an annual cargo throughput of 3.5 million tonnes by 2050.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/21087339/main.jpg
    Yasir Iqbal
  • Contractors prepare bids for Morocco power line

    2 November 2026

     

    Contractors are preparing bids for a 160-kilometre (km), 400kV transmission line linking Guercif and Fes East in Morocco, following a site visit on 1 October.

    The project is being developed by the Office National de l'Electricite et de l'Eau Potable (Onee) to connect the Saka solar photovoltaic power plant to the national electricity grid.

    According to sources, at least eight contractors attended the site visit last month, including:

    • Butec (Lebanon)
    • CEEC Northeast Electric No.2 (China)
    • Cegelec (France)
    • EPME Electric (Morocco)
    • Hideleco (Egypt)
    • Kec International (India)
    • PowerChina (China)
    • Transrail (India)

    The project comprises two lots. The first involves a 90km transmission line between Guercif and Taza, while the second covers a 70km section between Taza and Fes East.

    The scope of work includes the construction of tower foundations, installation of transmission supports and conductors, and associated high-voltage equipment. It also includes optical fibre cables for communications and monitoring, access roads and other supporting infrastructure.

    The tender was issued in September with bids originally due by 21 October. The deadline has now been extended to 25 November.

    The project is part of a wider programme by Onee to expand Morocco's electricity transmission network and accommodate additional renewable energy capacity.

    In June, the utility commissioned a 274km, 400kV transmission line linking Chemaia and Mediouna, near Casablanca.

    Onee plans to expand its high- and extra-high-voltage transmission network from more than 30,700km to 37,000km by 2030.

    In August, it approved a $26.4bn investment programme for the 2026-30 period, covering electricity and drinking water infrastructure.

    The programme has allocated about $21.9bn to electricity projects and $4.5bn to drinking water infrastructure, with about 72% of the investment to be financed by the private sector, according to Onee.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/21083507/main1257.jpg
    Mark Dowdall
  • Adnoc Onshore allows more time for Bab gas cap well tie-in bids

    2 November 2026

     

    The onshore business of Abu Dhabi National Oil Company (Adnoc Onshore) has allowed contractors more time to prepare proposals for a project to tie in gas-producing and injection wells at the gas cap reservoirs of Abu Dhabi’s onshore Bab field.

    The well tie-in scope, estimated to be worth more than $800m, forms part of Adnoc Group’s wider integrated Bab gas cap development programme.

    The overall programme is being led and overseen by Adnoc Gas, another Adnoc Group subsidiary. Its central element is the construction of gas-processing infrastructure to handle incremental gas output expected from developing the Bab gas caps.

    Adnoc Onshore issued the main tender for engineering, procurement and construction (EPC) works on the project in late September, MEED previously reported.

    Contractors have been given until 16 November to submit technical bids for the project, according to sources. The previous deadline was 29 October.

    MEED previously reported that Adnoc Onshore issued an expressions of interest (EoI) notice for the Bab gas production and injector well tie-in project on 13 May, with contractors submitting responses by 20 May.

    The scope of work on the project covers the following:

    • Tie-in of 99 new wells from Bab gas cap reservoirs KH-2, SH-1 and LK-1 (60 gas producers and 39 gas injectors);
    • Installation of well gathering structures: 10 gas pads, six well bays and three virtual pads;
    • Installation of a gas gathering network and a gas injection network;
    • Rerouting of the LK-3 production from the existing trunkline in Remote Manifold Station 3 (RMS-3) to the project’s production trunkline, Bab Gas TL-2;
    • Demolition of the existing 10-inch trunkline from RMS-3 to onshore gas development phase one.

    In the EoI document, Adnoc Onshore said it intends to award the EPC contract in the last quarter of the year, with a 45-month duration of works.

    Bab gas cap project infrastructure

    As part of its 2030 upstream production increase goals, Adnoc Group is working to extract gas from four underdeveloped gas cap reservoirs at the Bab onshore field development – Thammama A, Thammama B, Thammama F and Thammama H.

    While the Thammama A, B and H reservoirs are estimated to collectively produce 1.45 billion cubic feet a day (cf/d) of gas, output from the Thammama F gas cap is expected to be at a rate of 396 million cf/d.

    Existing trains at the Habshan processing complex in Abu Dhabi will be unable to handle the new gas volumes. Therefore, Adnoc Gas is required to build new facilities to process an additional volume of up to 1.85 billion cf/d of raw gas.

    Adnoc Gas is planning to build a gas processing plant in the Bab area, about 170 kilometres from Abu Dhabi, along with associated pipeline networks and other ancillary units, as part of the broader Bab gas cap development project. It has divided the EPC scope of work on the project into four packages:

    • EPC package 1 – Main Bab gas cap plant
    • EPC package 2 – Early civil works
    • EPC package 3 – Pipelines
    • EPC package 4 – Non-process area works

    Abu Dhabi Securities Exchange-listed Adnoc Gas issued the tender for the main Bab gas cap plant on 25 June and set an initial deadline of 17 July for contractors to submit technical bids. The company then extended the technical bid submission deadline by four months, until 16 November, MEED previously reported.

    Following a reshuffle of the consortiums gearing up to bid for the main Bab gas plant EPC package, estimated to be worth more than $6bn, the following teams have formed to compete in the main contract tendering round:

    • Larsen & Toubro Energy Hydrocarbon (India) + Petrofac Emirates (UAE)
    • Technip Energies (France) + JGC Corporation (Japan) + Sinopec (China)
    • Tecnimont (Italy) + China Petroleum Engineering and Construction Corporation (CPECC)

    The other three packages of the Bab gas cap project are also in the main contract tendering stages.

    Prior to issuing the EoIs for the project packages, Adnoc Gas completed an early engagement process with contractors in September and October last year, as MEED previously reported.

    In December last year, Adnoc Gas awarded the front-end engineering and design (feed) works for the development project  to Australia-based consultancy Worley. The feed contract has a duration of more than 1.2 million man-hours, making it the largest-ever engineering job awarded by Adnoc Gas.

    Bab Gas Cap concession

    In addition to Adnoc Gas overseeing the main EPC tendering exercise for the gas processing plant, Abu Dhabi’s Supreme Council for Financial and Economic Affairs (SCFEA) awarded concession agreements in June for the development and production of the Bab gas cap reserve.

    Adnoc will hold the majority 60% participating interest in the concession. The remaining stakes will be held by France’s TotalEnergies (10%), the UK’s BP (10%), China National Petroleum Corporation International (8%), Japan Oil Development Company Onshore (5%), China ZhenHua Oil (4%) and Korea GS E&P (3%).

    According to the SCFEA, the Bab gas cap development and production concession represents the largest gas cap development project of its kind globally, the Abu Dhabi Media Office said in a report.

    A gas cap refers to the free natural gas that sits above an underlying oil reservoir – in this case, the Bab onshore oil field in Abu Dhabi.

    The project, operated by Adnoc Onshore, is expected to have a production capacity of approximately 1.5 billion cf/d of natural gas, equivalent to about 15% of Adnoc Gas’ total operational gas processing capacity.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/21083343/main.jpg
    Indrajit Sen
  • Gulf ministers insist Hormuz is still essential

    2 November 2026

    Register for MEED’s 14-day trial access 

    Senior Gulf officials have rejected suggestions that new pipelines and rail links will allow the region to do without the Strait of Hormuz, arguing that the waterway will remain essential to the GCC and the global economy.

    Speaking at the Gateway Gulf investment forum in Manama on 1 November, GCC secretary-general Jasem Mohamed Albudaiwi said keeping the strait open is the responsibility of the international community, not of any one country or group of partners. "We hear some voices that maybe we should seek alternatives to Hormuz," he said. "Fine, we will get the pipelines. We will get the GCC railway. But that doesn't mean Hormuz is nobody's business."

    Albudaiwi called for the strait to remain open in line with international law, including the 1982 UN Convention on the Law of the Sea.

    Shipping through the strait has been severely restricted since the US and Israel launched strikes on Iran on 28 February and Iran retaliated with attacks on GCC states and commercial vessels.

    Bahrain's Finance & National Economy Minister, Sheikh Salman Bin Khalifa Al-Khalifa, said building redundancy makes sense, but treating the strait as dispensable does not. He said the waterway carries 30% of global liquefied natural gas (LNG) exports, 20% of aluminium exports and 30% of fertiliser exports. "Any thinking about the alternative of Hormuz, as in we won't need it, is illogical, because we will need it for the world economy," he said.

    UAE Economy & Tourism Minister Abdulla Bin Touq Al-Marri said that "Hormuz matters, and Hormuz will keep mattering", adding that an economy dependent on a single trade route is exposed if that route closes.

    Sheikh Salman said the crisis has compressed years of GCC customs negotiations into weeks. During the conflict, containers cleared at Jeddah with final destinations in Bahrain or Kuwait moved on without further checks, and the same applied to cargo routed through Salalah and Fujairah, he said. GCC ministers have since agreed to make these emergency measures permanent.

    He also cited Gulf Air operating out of Saudi airports for more than 40 days without a written agreement, and a $5bn swap between the UAE and Bahraini central banks to stabilise currencies.

    Bin Touq said the bloc should use 2027 and 2028 to push through reforms, including removing remaining customs barriers between member states.

    Albudaiwi said GCC leaders meeting in Jeddah on 28 April had tasked the secretariat with advancing water connectivity, expanding the GCC electricity grid, planning new logistics infrastructure including ports, accelerating the GCC railway and enhancing oil and gas pipeline links.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/21080732/main4958.jpg
    Colin Foreman
  • Bahrain’s Gateway Gulf brings $20bn of deals

    2 November 2026

    More than 110 announcements worth over $20bn will be made at the Gateway Gulf Investment Forum in Bahrain, according to the country's finance minister.

    "Over the next two days at Gateway Gulf, more than 110 announcements worth over $20bn will be made," Sheikh Salman Bin Khalifa Al-Khalifa, Finance & National Economy Minister, said at the opening of the forum's fourth edition on 1 November in Bahrain.

    He said the announcements will cover new partnerships, investments, projects and jobs. Sheikh Salman addressed an audience that included Bahrain's Crown Prince and Prime Minister, Prince Salman Bin Hamad Al-Khalifa.

    The minister said the region's economies have been "tested as never before" since the previous edition of the forum a year earlier.

    "In the face of unprecedented attacks, we did not waver," he said. He added that Bahrain has chosen to work more closely with its allies and partners to defend what it has built.

    Sheikh Salman said the Gulf economy has grown to $2.4tn in GDP. Non-oil sectors account for more than 86% of Bahrain's GDP and more than 77% across the Gulf, he said.

    He said Gulf banks hold more than $4tn in assets, while the region's sovereign wealth funds manage more than $5tn of investments. "These numbers describe a region that has chosen to build a more stable, a more prosperous future for its people," he said. "Bahrain is the gateway to that region."

    The minister said Bahrain is focusing on regulation, infrastructure and people to attract investment.

    He said the country has developed a regulatory framework over several decades that is "clear, modern and fast", allowing investors to commit with confidence.

    On infrastructure, he highlighted logistics, connectivity, digital networks and industrial land as areas where Bahrain is building the foundations for businesses to expand. He also named finance, logistics, tourism, manufacturing, technology and telecommunications, and oil and gas as the sectors into which he expects domestic, regional and international capital to flow.

    He said the investments will create jobs for young graduates and support the growth of family businesses.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/21080593/main2015.jpg
    Colin Foreman