As most of the traders might be familiar with the market, forex wouldn’t be a new term to come across. It is the most accessed liquid market in the world, and its size suffices the huge demand and inflow of traders. A service that runs 24×7 has redefined trading with its features that differ a lot with the stocks. The bustling market witnessed a whole new dimension taking form with the liquidity of currency taking a backseat. Digital currencies slipped into the forex market and brought about changes that were, in a way, radical.
Of all cryptocurrencies, Bitcoin was the first to have set foot in the market. Of late, several traders and forex brokers have accepted the use of a wide variety of cryptocurrencies in currency trading. Although such reports have been coming in, many traders seem to be confused with the idea of mixing the concept of the liquid market with digital currency. The volatility of cryptocurrencies is believed to have an impact on forex trading, leading to unpredictable losses than that of the traditional trading practice. Let us dive deeper into forex trading with Bitcoin to see if that benefits you or not.
How Forex Trading Works
Using cryptocurrency for forex trading will change the fundamentals of its working. The exchange of currencies is all about the basics of forex trade that one has to know, but the trade has more layers which you need to understand thoroughly before starting off your exchange. Both Bitcoin and forex trading uses decentralized platforms. But the area where both these primarily differ is the centralized control over the fiat currencies being traded in forex. No such support is provided to Bitcoin or any cryptocurrency which could pose as a risk. You need to keep in mind the fact that trading with Bitcoin will have a different effect on your assets. If it works out well and is in its booming stages, profits could go beyond expectation. But if the dark side of volatility sets in, you could be subject to losses. Risks are relatively more in forex trading with Bitcoin than that of fiat.
Benefits
· Free of Centralized Valuations
Trading with Bitcoin will put you at an advantage of earning money from the benefit of it being free from the influence of centralized valuations. Inflations existing in certain countries could affect the trading values in the centralized structure, which do not apply here.
· Leverage Potential is High
You are open to better leverage options with the forex trade using Bitcoins. Use it your benefit but only by curbing on your investment by keeping in mind the probability for loss.
· Trading Cost is Lower
Since the Bitcoin trading option is relatively new to the forex platform, brokers have kept their cost low to attract more clients.
Risks
· Varying Exchange Rates
Since Bitcoin keeps trading over multiple exchanges, the rates will vary. You will need to understand the forex broker’s exchange rates.
· Volatility-The Biggest Risk
Bitcoin is well-known for its volatility, which is an inevitable feature. Since there is no central power to regulate the trade, the volatility could be used by brokers to put you at risk.
· Bitcoin and Security
These two never blend to ensure secure transactions. Most trades take place safely, but there have been several cases where assets have been thieved of the broker’s wallet. So make sure to opt for brokers who guarantee security through insurance protection to keep their wallets impregnable to hacking.