The number of individuals joining the highly lucrative world of forex trading is growing. The high margins, currency instability, and devaluations have resulted in forex traders make a killing in world markets.
One interesting development that has taken place in the last year has been the acceptance of Bitcoin payments for trading foreign exchange. The forex market is itself very nuanced, to begin with, and getting Bitcoin into the scheme of things seems to have taken it another level altogether.
Forex trading platforms like eToro, LiteForex, and others have started accepting Bitcoins from traders. If you are someone who likes the highly volatile and exciting world of trading forex and cryptocurrencies, you should pay attention.
Trading Foreign Exchange: Know the Basics
In very simple terms, forex trade is a kind of a trade where traders put the valuation of one currency and pitch it against the other. The expectation is that when the currency devalues, the pitched currency will gain in value and they will secure a profit.
Let me explain the same with the help of a simple example-
‘Imagine you want to trade forex with $100 USD and pair the same with the British Pound. For $100 USD, you are going to get the equivalent of the same in Pounds. If we take the amount to be 50 BP. If the value of the Pound goes down, you will get more in the form of dollar pay-outs.’
Forex trading thrives on instability and rapid changes in currency valuations. Forex trading is considered very beneficial, especially for people willing to take the risks. The markets are renowned for being open 24×7 and are considered to be the most liquid in the world.
Trading Forex with Bitcoins: What you need to know
Taking the example presented in the last section, simply replace the dollar with Bitcoins and base the value of the Bitcoin basis the dollar price of the moment.
In addition to benefitting from the price of the British Pound going down and the Dollar rising, not only will you make money of the same, but what happens when in the same period, Bitcoin raises to another astronomical Bull Run?
You stand to make double benefits, as now the value of One Bitcoin post the forex trade is no longer the same as it was when you had first traded the same. Your pay-outs from using Bitcoins in forex trading will simply result from-
- Getting the benefits and margins from the rising dollar
- Getting the benefits and margins from the rising Bitcoin prices
In other words, it is going to be a win-win situation if you are trading Forex when Bitcoin is in the midst of a strong Bull Run!
What are some things Forex Traders using Bitcoins should watch out for?
While we have mentioned the obvious benefits in the last section, there is no doubt that there is also an element of the high risk involved.
This is because there is still a level of unpredictability and volatility in Bitcoin price valuations. It can swing dangerously between earth-shattering highs and deafening lows. According to Crypto market, it is important that traders weigh the pros and cons before progressing with their decisions.
Bitcoin prices are not static even between Cryptocurrency exchanges and can vary greatly. Changes in small percentage points can result in hundreds of dollars being called into question.
In addition to the above, you also need to understand that given Bitcoin’s high prices there are a number of unlicensed brokers looking to make a beeline with your Bitcoins. Ensure that you are working in a credible platform that has insurance protection in place to safeguard your Bitcoins.
The Bottom Line
There are millions to be made trading forex with Bitcoins. However, if you are not someone who can stomach the losses and have an appetite for massive fluctuations it is better you stick to trading forex with dollars.