The Benefits Of Trading Bitcoin With A Forex Broker

The currency trading market is the world’s most popular, comprehensive, and competitive trading platform.

The global currency market stays open all day in a 24-hour functioning mode. You can access the currency marketers from anywhere any time around the globe. Forex broker’s connections are the easiest way to start your forex trading, 

But do you know many forex brokers have started to accept bitcoins for forex trading, with some also allowing other digital currencies? Yes, it is true. 

Cryptocurrencies likeBitcoinn have added a new and intriguing dimension to currency trading as if the market wasn’t already dynamic enough. Should you jump in and start trading forex with your hard-mined bitcoins? First, read the advantages and the maximum star ratings of the AAFX. 

Process Of A Standard Forex Trade 

A forex deal is just the conversion of one currency into another at the official exchange rate, unlike visitors who exchange their native currency for local forex brokers and spend cash. The traders and the forex broker strive to profit from the constant swings in the currency’s actual value vs. another. 

Here are the most straightforward steps to start trading with the forex broker. 

1. Trading A ‘Pair.’ 

Assume you’re an American trader who believes the British pound will lose value against the dollar. The pair trading is trading on the British pound or the US dollar currency. 

You make a $100 deposit with a forex broker. You will get £50 for your $100 if the exchange rate is $1 = £0.5. Then, you close the bet at 50/0.45 = $111.11 if the GBP/USD currency goes to 0.45. That is, you profit 11.11% on your initial $100 investment. Most forex trading takes place in decentralized over-the-counter markets. On the other hand, the forex market is decentralized, and just because Bitcoin is a decentralized digital currency doesn’t mean the two are convertible. 

2. The Impact Of Decentralization 

The main difference is that while FX markets are decentralized, the currencies are supported by financial institutions in the nations that issue them. It is the responsibility of those banks to maintain and regulate the value of their currencies. That support is not available for Bitcoin or most other cryptocurrencies. 

3. A Forex Trade Using Bitcoin 

Take, for example, If you are interested in the bitcoin-based forex trade. First, open your forest trading account where the bitcoins are accepted. Every forex broker clearly describes what type of coins they are receiving ss, do not forget to check it before the account opens. 

AvaTrade, eToro, and LiteForex are among them. You then send two bitcoins from your digital wallet to the virtual wallet of the FX broker. 

Your investment of 2 bitcoins is approximately $64,000, assuming the current bitcoin to US dollar rate is one bitcoin = $32,000. Let’s pretend you wish to invest in the British pound. You will obtain £32,000 if the rate of exchange is £0.5 = $1.

The GBP/USD rate drops to 0.45 after some time, and you close your position to receive $7,111.11 in your brokerage account. You’ve made a nice profit of 11.11 percent and are ready to cash out. 

4. The Bitcoin Effect 

Assume, however, that the bitcoin to US dollar exchange rate has changed over this time, and one bitcoin now equals $36,000. When you make withdrawals in bitcoins, you get 1.975 bitcoins ($71,111.11/$36,000). Even though your bet on British pounds paid off with a profit of 11.11 percent, the change in the bitcoin to US dollar rate means you lost 0.024 bitcoin or -1.2 percent. 

You would earn from both the forex market and the bitcoin exchange if the bitcoin to US currency exchange rate moved to 1 bitcoin = $30,000. You would have received 2.37 bitcoins ($71,111.11/$30,000), a profit of 18.5 percent. 

5. Increased Unpredictability 

This hypothetical situation exemplifies the importance of exercising caution when trading FX with digital currency. Even Bitcoin, the most well-known and extensively used cryptocurrency, is quite volatile in comparison to most traditional currencies.  

The value of Bitcoin fluctuated from $5,532 to $11,982 in the year ending July 24, 2020. Because of this unpredictability, the dangers of trading FX using Bitcoin are significantly greater.

There are other benefits and hazards to consider before trading through a forex broker using Bitcoin, aside from the influence of exchange rate swings on profit and loss. 

Benefits Of Trading Forex With Bitcoin 

The rising popularity of Bitcoin as an investment tool has piqued the interest of forex brokers eager to diversify their product portfolios.

Some consider bitcoin to be a traditional currency because bitcoin trading is not based on a country’s macroeconomics but rather on the underlying system and broader response to worldwide economic developments. 

Here are the benefits of bitcoin trading with a forex broker. 

1. Decentralized Valuations:

The fact that Bitcoin is not tethered to a banking system is a significant benefit when trading FX with it. Digital currencies are unaffected by the locations and free of centralization. These currencies are free from country-specific volatility and interest rates of currency transactions. 

2. High Leverage Debt:  

For bitcoin trading, many forex broker firms provide leverage. Experienced traders can take advantage of this. High margins, on the other hand, should be addressed with prudence because they multiply the risk of losses. 

3. Low Deposit Amount: 

Some bitcoin FX trading services allow traders to start with as little as $25. A few forex trading firms are offering bonuses such as deposit matching. If the broker is legitimate and properly regulated, then this offering of a bonus is a high achievement, but before accepting this, the traders should check the legal details of the brokers. 

4. Low Cost Of Trading:  

To entice new clients, most forex brokers that handle Bitcoin keep their brokerage rates low. 

5. Security:  

To make a Bitcoin transaction, you do not need to give your bank account or credit card information. In terms of cost and economic security, this is a significant benefit. 

6. No Global Boundaries:  

Bitcoin transactions have no geographical limitations. A South African trader can trade forex using a broker situated in the United Kingdom. Regulatory issues may persist, but there are no geographical restrictions when both traders and brokerage are prepared to transact. 

Disadvantages of Trading with a Forex Trader 

Yes, there are several benefits of trading Cryptocurrencies with a Forex Trader. However, there are several drawbacks as well. It would help to have a clear understanding of the drawbacks as well as to make the most out of your trade.

Here are a few things  you must be mindful about – 

Leverage 

Some forex traders may often offer high leverage. It may seem enticing at first. But don’t proceed without caution and proper risk management.  

Reputation 

It’s often difficult to understand whether a Forex trader is reputable and trustworthy or not. If there’s a trust issue or possibility of risk, cryptocurrency trading with them may incur more losses than profit.  

Trading Costs 

In most cases, regulated cryptocurrency exchange platforms have minimal trading fees involved for each exchange. Forex traders may charge comparatively more, which is against a profitable trade.  

Security Risks 

Yes, cryptocurrency transactions are end-to-end encrypted and there are several layers of security keeping the digital currency safe. However, a security breach is still possible. Hackers can hack into the digital wallet of your trading partner and still the currency. 

Regulatory Uncertainty 

Cryptocurrencies will still take more years to become stereotyped. The regulatory landscape across the world is changing and affecting the way investors or Forex traders can access and use them. It’s best to stay compliant with the changing regulatory norms if you are trading cryptocurrencies with Forex traders.  

Legal Implications 

Some countries have several legal implications for cryptocurrencies. It doesn’t matter whether you are trading with Forex traders or traders or other partners; you may still have to face the consequences if you are trading cryptocurrencies. 

Volatility 

This is one of the key factors to consider if you are trading cryptocurrencies with Forex traders. These currencies are volatile, and their market can shift at any moment. Bitcoin, among all the cryptocurrencies, is the most volatile cryptocurrency.

In addition, a shift in Bitcoin’s price can affect other currencies as well. So, investors may incur a loss even with the possibility of gaining from their trade with a Forex trader. 

Conclusion

Although cryptocurrencies such as bitcoin are becoming more popular, there are still some risks involved with them. Dealing with a decentralized currency that allows for international transactions with no costs is advantageous in forex trading.

However, the trade-off entails adding a third currency to what was formerly a trading pair. Traders who want to take that chance should only utilize forex broker connections and the brokerage as licensed locally. 

Read Also:

• 5 of the Most Common Investing Mistakes
• Basic Rules and Tactics for Forex Trading