It is no news that the forex market is the largest and most liquid market worldwide and of course no doubt that it is truly global. With a 23/7 5 days a week schedule, traders can come in, place positions, and leave as they please. There is a growing interest in forex trading and this has been the case before, and post-pandemic, with numbers in February increasing a whopping 300% over. These high numbers had speculators wondering if the February to June 2019’s $3130 to $13,00 was due to the growing interest in forex. Statistics from research shows that more and more younger investors and millennials who are very skeptical of the standard financial institutions such as banks are flogging into forex trading. As the years go by, we realize more people stating their interest in joining the bandwagon of the foreign exchange, cryptocurrencies are not left out. Since forex is not dynamic enough for some traders, cryptos like bitcoin, litecoin, ether, are bringing in an interesting new aura to the financial market. Leading to many forex traders accepting payments in cryptocurrency. Statistics, numbers and studies sound very profitable until you hit a series of bad positions and make several losses. At this point, new investors get salty.
It is rather fortunate for beginners that the foreign exchange market is not as complicated now as it was years ago- say 2017. That foreign exchange is easy to access and run now doesn’t mean that there are no speed bumps on the market, especially with regards to making cryptocurrency payments. To avoid lacklustre trade performance here’s all you need to consider before jumping into the money market and making considerations to pay in crypto! Becoming a successful trader sounds all juicy when you hear the numbers and profits people make. However, beginners and even a number of experienced traders have been victims of bitcoin scams. The reason why most people are susceptible to being scammed with bitcoin transactions is the fact that it operates on an anonymous basis. What sets crypto exchanges and forex brokers in terms of choice of middlemen is the experience. Innovations develop everyday and these brokers have to quickly adapt to it as the markets demand. The idea of a crypto exchange is relatively new and they’re still learning how to operate it. However, forex brokers have decades of experience sometimes.
Even if some reviews or some kind of information circulates about good FX brands it doesn’t immediately mean that they support cryptocurrencies. Even smaller brands like Axiory have tried to make it clear on their social media and websites that they do not support cryptos. According to several reviews for the Axiory broker legitimate brands like them do everything in their power to spread the word if there is misconception about something as serious as cryptos being accepted with them.
Conventional forex trade
Before making consideration on whether or not you need to trade forex using cryptocurrency, it is vital that you understand how the standard forex trading works. Foreign exchange i.e forex trading is basically trading one currency for another at its current value. The difference between forex trading and exchanging your local currency for spending is that forex traders do it to make profits from the fluctuations in the prices of currencies against each other.
Trading a pair
Envisage a situation where you are a British trader betting that American dollars will lose value compared to British pounds. This position in trading is called a GBP/EUR pair. Forex trading is mostly decentralized, although regulated. Bitcoin and forex being decentralized financial forms do not make them the same. The difference between the two is that, although forex trading is itself decentralized, it is backed by centralized authorities such as central banks where the currencies are issued. The central banks are the authorities that stabilize the various currencies. Bitcoin, on the other hand, does not have that kind of backup.
Forex trade using Bitcoin
Not all forex brokers accept payment in bitcoins. And of course, it is unquestionable that you would make it a point to invest with a reputable firm and those with forex bitcoin deposits as you require. If the bitcoin to British pound rate is say, 1 bitcoin = £7000, your two bitcoin deposits will total up to £14.000. Assuming that you made a position on the US dollars with a rate of £0.5 = $1, you will get $7000. When the GBP/USD exchange rate changes to £0.45 your position will be squared up to $1.666.65 in your account. That is a smooth 11% gain you can cash out at the moment.
The risks involved in trading forex with bitcoin are many as well as the benefits, but to ensure that you are mostly making profits, carefully look into the cons of trading forex with bitcoin on this website, which includes:
Distinctive exchange rates: Bitcoin exchanges on various trades and trade rates fluctuate. brokers must guarantee that they comprehend which bitcoin trade rates the forex agent uses.
US dollar rate risk: While getting bitcoin deposits from customers, practically all agents immediately sell the bitcoins and hold them in USD. Regardless of whether a broker doesn’t take a forex exchange position following the deposit, the individual is presented with the bitcoin-to-USD exchange rate risk upon withdrawal.
The threat of Volatility: Historically, bitcoin costs have displayed high instability. Without guidelines, unpredictability can be used by unregulated agents for their potential benefit at the expense of the broker.
Bitcoin security risks: Deposited bitcoins are inclined to robbery by hacking, even from a dealer’s wallet. To decrease this danger, search for an agent who has protection insurance against robbery.
The danger of Leverage: This is risky for new brokers who may not comprehend the vulnerability. This danger isn’t exceptional to digital currency only, but also to forex trading as well.
Despite the disadvantages involved with trading forex in bitcoin, there are advantages such as decentralized valuation, high leverage, low deposit amount, low cost of trading, security, and no global boundary.