Cryptocurrency, crypto bubbles, blockchains – what associations do you have with Bitcoin? There is no doubt that this digital asset has been a hot topic in the news and investment world over the past few years. The demand for it is not decreasing, but rather gaining worldwide.
But what does this mean for traders who want to use Bitcoin to trade forex? Is it a wise decision? This article will discuss the forex market and how to trade Bitcoin in Forex.
Let’s begin.
How does the Forex market work?
Forex is a huge marketplace where people buy and sell foreign currency pairs. The best part is that it is open 24 hours a day, 5 days a week and even offers some conditions to trade on weekends. This means that people from all around the world have a chance to make deals at the same time. Keep in mind that not just individuals trade forex – many banks and businesses also participate in this process.
But how does all this work?
When traveling to another country, you usually exchange the currency of your home country for the currency of the foreign country. In a nutshell, the same thing happens in the Forex market – you trade different currencies by buying one and selling the other. Your goal is to make a profit from these predictions by guessing which currencies will go up or down in value.
Usually, the trading processes are carried out via forex brokers – companies that provide you with all the necessary tools. Check out Top Forex Broker to reduce the risks of approaching forex trading scams on your way.
Is Bitcoin a currency?
Bitcoin is not a recognized currency by every participant in the global markets, including regulators and government officials. However, due to its growing popularity, many brokers allow bitcoin trading as part of their forex services. Investors should be aware that there are some realities about how bitcoin trading works before getting involved.
How to trade Bitcoin in Forex?
Let’s understand how to trade Bitcoin in Forex now.
There are a number of forex platforms that offer bitcoin trading, but these platforms may not be as robust as those that trade in national currencies. Bitcoin-based exchanges may have a better understanding of the market and security requirements, which could lead to reduced trading costs. Since the collapse of Mt. Gox (a bankrupt cryptocurrency exchange), these exchanges say they have improved their models with better security mechanisms. For example, Coinbase has expanded to over 100 countries.
By the way, it is one of the widespread ways of investing in Bitcoin. In order to buy bitcoins, you need to create a bitcoin account and add money to it. Coinbase doesn’t keep track of different kinds of money, so every time you want to trade bitcoins for dollars or need to take some extra security steps. Buying bitcoins usually takes 3 to 5 days, which is a lot slower than traditional currency exchanges.
Advantages and disadvantages
Let’s have a look at the benefits and risks of trading forex with Bitcoin:
The advantages
- high leverage
Forex brokers offer leverage for bitcoin trades. This can be a great opportunity for experienced traders to make some profits. Check out the BDSwiss review to explore one of the brokers with high leverage.
- security
Bitcoin transactions can be conducted without revealing bank account or credit card details, which is a big advantage in terms of cost and financial security.
- low cost of trading
The forex brokers offer low brokerage costs to attract new clients, as this form of payment becomes more widely accepted.
The disadvantages
- volatility danger
Bitcoin prices are highly volatile and can be used to the advantage of unregulated brokers while disadvantageous to traders.
- different exchange rates
Bitcoin trades on multiple exchanges, and the exchange rates can vary significantly between different exchanges. Traders should ensure they are using the correct exchange rate when trading Bitcoin, so it is important to understand which one their forex broker will be using.
- asset class mixing
Cryptocurrency is a type of asset that has its own way of being valued. Trading Forex with Bitcoin introduces a new currency to the mix, and this can change how profits and losses are calculated. Any money that is not locked down in your main currency is a risk.
Is it safe to trade with Bitcoin in Forex?
A lot of people are asking themselves whether it is safe to trade with Bitcoin in Forex. The truth is that there is no certain answer to this question. As you see, while there are certainly some risks involved in trading with Bitcoin, there are also a number of advantages that make it an attractive option for many forex traders. The choice depends on you, your personal financial goals, and your requests.
Conclusion
Cryptocurrencies like Bitcoin are becoming more popular, but like any other investment type, they come with risks. Just make sure you’ve managed all of them before starting this activity and weigh the pros and cons to see if it is a good decision for you.
Image by Sergei Tokmakov Terms.Law from Pixabay
