meed-logo

line1 line2 line3
SIGN IN / REGISTER

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

Register for MEED's guest program now to access this article.

Click here to register
Exclusive from Meed
Related Articles
  • Kuwait halves drilling contractor pool

    22 September 2026

     

    State-owned upstream operator Kuwait Oil Company (KOC) has reduced the number of approved contractors for onshore drilling and shallow-well maintenance from 51 to 24.

    Firms that are no longer qualified include major contractors such as Italy’s Saipem, Oklahoma-based Helmerich & Payne and Houston-based Patterson-UTI Energy.

    The latest list still includes a wide range of Kuwaiti, regional and international companies, according to the latest update on its electronic system, published on 21 September 2026.

    The full list of contractors that are now qualified to participate in tenders is:

    • Burgan Company for Well Drilling, Trading & Maintenance (Kuwait)
    • Kuwait Drilling Company (Kuwait)
    • Sun Drilling Kuwait (Kuwait)
    • TDL Kuwait for Oil Rigs & Natural Gas Extraction Activities, Services and Facilities (Kuwait)
    • United Precision Drilling (Kuwait)
    • Abraj Energy Services (Oman)
    • Adnoc Drilling Company (UAE)
    • Arabian Drilling Company (Saudi Arabia)
    • Anton Oilfield Services (China)
    • China Oilfield Services (China)
    • Egyptian Drilling Company (Egypt)
    • CNPC Bohai Drilling Engineering Company (China)
    • Great Wall Drilling Company (China)
    • John Energy (India)
    • Kerui Oilfield Service (China)
    • KCA Deutag Drilling (Germany)
    • Mohammed Al-Barwani Petroleum Services (Oman)
    • Nabors Drilling International (US)
    • National Drilling & Services Company (Oman)
    • Sea & Land Drilling Contractors (Oman)
    • Sinopec International Petroleum Service Corporation (China)
    • Karamay Jianye Energy (China)
    • Modern Drilling Company (Egypt)
    • Grey Wolf Drilling International (US)

    An earlier list, which was published on 11 February, included 51 qualified companies.

    The reduction in qualified drilling contractors follows KOC’s notice on 27 April this year, informing existing qualified contractors that they would need to reapply.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/19863744/main3435.jpg
    Wil Crisp
  • Abu Dhabi expects 45% emissions cut as electricity demand rises

    21 September 2026

    Register for MEED’s 14-day trial access 

    Abu Dhabi-based Emirates Water & Electricity Company (Ewec) expects carbon emissions from power and water production to fall by more than 45% by 2035 as the UAE expands renewable energy and reverse osmosis (RO) desalination.

    The state offtaker's latest long-term system planning forecasts emissions will decline from about 42 million tonnes in 2019 to approximately 23 million tonnes in 2035.

    The reduction is expected despite annual electricity demand that is forecast to rise by about 70% in 2026-33.

    Ewec said the expansion of renewable energy and the shift towards RO desalination will be the principal drivers of the reduction.

    The company plans to increase Abu Dhabi's solar capacity to 14GW by 2030 and more than 35GW by 2035. This will be supported by up to 15GW of battery storage capacity.

    According to regional project tracker MEED Projects, Ewec has over $16bn-worth of power and water projects in the execution stage as part of its long-term procurement programme to increase renewable energy and low-carbon water production capacity.

    This includes a 5.2GW Abu Dhabi solar and battery energy storage system (bess) round-the-clock renewable energy project, as well as three 1.5GW solar photovoltaic independent power projects (IPP): Al-Ajban, Al-Khazna and Al-Zarraf.

    It also comprises the 1GW Al-Dhafra open-cycle gas turbine power plant, the 2.5GW Taweelah C combined-cycle gas turbine (CCGT) plant and a separate 400MW bess IPP.

    As previously reported, it is expected that the developer's agreement for the 3.3GW Al-Nouf 1 CCGT IPP will be signed by the end of the year, while contractors are preparing to submit bids for a separate 2.6GW power plant project in Ajman.

    The expansion of solar and battery storage is expected to reduce the system's reliance on gas-fired generation. However, gas-fired generation will continue to provide flexibility to support the system and balance intermittent renewable power output, according to Ewec. 

    The offtaker also expects RO desalination to account for more than 95% of total water production by 2035, with the procurement programme supporting the Abu Dhabi Department of Energy's Clean Energy Strategic Target 2035 for electricity production and the UAE Net Zero by 2050 Strategy.

    READ THE SEPTEMBER 2026 MEED BUSINESS REVIEW – click here to view PDF

    Nuclear power ambitions gather pace; Kuwait keeps dealmaking alive despite war; Region invests in raising gas processing capacity.

    Distributed to senior decision-makers in the region and around the world, the September 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/19849749/main.jpg
    Mark Dowdall
  • Seven bid for Bahrain highway upgrade

    21 September 2026

    Register for MEED’s 14-day trial access 

    Seven contractors have submitted bids for the next phase of the Sheikh Jaber Al-Ahmed Al-Sabah Highway upgrade project.

    According to results published by the Bahrain Tender Board, the firms that have submitted bids include:

    • Nass Contracting Company
    • Haji Hassan Group
    • Almoayyed Contracting Group
    • Mohammed Abdulmohsen Al-Kharafi & Sons
    • Eastern Asphalt & Concrete Production
    • Cebarco Bahrain
    • Kingdom Asphalt

    The contract scope includes expansion works on 2 kilometres of the highway. It consists of a four-lane dual carriageway with service roads on both sides.

    The scope of works also includes excavation and backfill work, construction of stormwater drainage networks, a pumping station, installation of ducts for future utilities, upgraded street lighting, traffic signs and directional signage.

    The project aims to improve traffic capacity, reduce congestion and enhance safety along the transport corridor linking Manama with industrial zones.

    In April, MEED reported that Bahrain had approved a financing agreement framework to fund the construction of the next phase of the Sheikh Jaber Al-Ahmed Al-Sabah Highway upgrade.

    In March last year, the Kuwait Fund for Arab Economic Development and the Bahraini government signed a KD10m ($32.4m) loan agreement to fund the second phase of the project, which is expected to cost about $404m.

    This was followed in September 2025 by the appointment of US-based Parsons Corporation on a $1.5m contract to provide pre-contract engineering consultancy services for the project.

    According to data from regional project tracker MEED Projects, construction of the first phase was completed in 2020.

    A joint venture of local firm Nass Contracting and Kuwait’s KCC Engineering & Contracting undertook the main construction works.

    READ THE SEPTEMBER 2026 MEED BUSINESS REVIEW – click here to view PDF

    Nuclear power ambitions gather pace; Kuwait keeps dealmaking alive despite war; Region invests in raising gas processing capacity.

    Distributed to senior decision-makers in the region and around the world, the September 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/19847073/main.png
    Yasir Iqbal
  • Teams prepare bids for Oman PPP wastewater project

    21 September 2026

     

    At least three consortiums are preparing bids for a contract to develop and operate two major sewage treatment plants (STPs) in Oman.

    The public-private partnership (PPP) project covers expanding two Muscat-based plants: the Al-Ansab STP (phase three) and the Al-Amerat STP (phase two). It will be delivered under a build-own-operate-transfer model.

    At Al-Ansab, capacity will increase from 125,000 cubic metres a day (cm/d) to 207,000 cm/d. At Al-Amerat, capacity will rise from 18,000 cm/d to 54,000 cm/d.

    According to sources, the bidders for the project include:

    • Etihad Water & Electricity (UAE) / Metito (UAE)
    • Lamar Holding (Bahrain) / Tawzea (Saudi Arabia)
    • Civil Works Company (CWC, Saudi Arabia)  / Suez (France)

    The bid submission deadline is 5 January 2027.

    State-owned Nama Water Services (NWS) issued a request for proposals for the project in July, as exclusively reported by MEED.

    It is understood that Veolia (France), Miahona (Saudi Arabia) and Samsung E&A (South Korea) are also among the firms that prequalified for the project after the request for qualifications was issued last November.

    The project scope includes the design, financing, construction, operation and maintenance of the new facilities, alongside the long-term operation of the existing facilities.

    It has been over a decade since the Al-Ansab STP first entered full operation at a capacity of about 54,000 cm/d. In 2015, South Korea’s Doosan Ennerbility, formerly Doosan Heavy Industries, was awarded the main engineering, procurement, and construction contract for the phase two expansion, which increased the facility’s maximum flow capacity to 125,000 cm/d. This phase was completed in 2017.

    Phase one of the Al-Amerat STP was awarded to a joint venture of France’s Degremont (Suez) and local contractor Al-Ansari Trading Enterprise under a design, build and short-term operation contract valued at about €50m ($58.1m). The plant was developed for Haya Water and commissioned in 2019 as part of the Muscat wastewater scheme.

    Haya Water, the former wastewater utility, was later incorporated into NWS following a government restructuring programme.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/19794912/main.jpg
    Mark Dowdall
  • Oman reveals Sohar airport and Salalah Thumrait Road plans

    21 September 2026

    Oman is planning a new passenger terminal at Sohar Airport to expand regional air connectivity and strengthen the airport’s role in the national aviation network.

    According to Said Bin Hamoud Al-Maawali, Oman’s minister of transport, communications and information technology, new routes are expected to be announced before the end of the year. Potential destinations include Dammam in Saudi Arabia, Gwadar in Pakistan, and southern Iran.

    The planned terminal and additional routes will give residents of northern Oman more travel options.

    Al-Maawali also provided an update on the long-delayed Salalah-Thumrait truck road, saying the project will be procured through a conventional tendering model rather than a public-private partnership (PPP).

    In August 2023, Oman shortlisted five of eight prequalified teams to compete for the Salalah-Thumrait truck road project, which was set to be the sultanate’s first PPP road project.

    The 67-kilometre road project is specially designed for heavy vehicles. 

    The road is a key link in Dhofar’s transport network, connecting Thumrait with Salalah and supporting movement between the interior and the governorate’s main urban and economic centre.

    READ THE SEPTEMBER 2026 MEED BUSINESS REVIEW – click here to view PDF

    Nuclear power ambitions gather pace; Kuwait keeps dealmaking alive despite war; Region invests in raising gas processing capacity.

    Distributed to senior decision-makers in the region and around the world, the September 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/19794881/main.jpg
    Yasir Iqbal