Forex which literally means foreign exchange of National currencies also referred to as, FX, is one of the biggest liquid markets of the world. The global market of currency is open 24/7 all over the world. Trading it in Pakistan is not authorized yet. The Securities and Exchange Commission of Pakistan (SECP) do regulate such customers and financial issues. Due to the highest reach in the world, whether it is of trade, commerce, or finance, forex marketing is the greatest asset of all time. It works by exchanging currencies with each other per exchange rate pairs. It is also referred to as the decentralized market for the trade of currencies. The already versatile and dynamic platform of forex got a new dimension when cryptocurrencies are added to it. And one of my all-time favorite cryptocurrencies is Bitcoin. Is there any place where Bitcoin has not made its place? So, in the past few years, forex trading brokers started to accept Bitcoin as digital currency trading. Although it just added a new layer to the already present risk of trading by forex, aggravated by the intense volatility of cryptocurrencies. Let’s first talk about how a forex trade works.
What does standard Forex trades mean?
So, basically, the concept of forex trade is not complicated much. It is a simple exchange of two currencies at their present rate. It’s not like exchanging currencies with tourists. Forex traders make money off the frequent oscillations in the real cost of one currency opposite to another. Most of the time, it is being done in decentralized mode. As you know bitcoin is also a decentralized currency, but both are not the same and can never be equivalent. The reason behind this is that despite of decentralization, the central banks support forex trading currencies which they issue. It’s their job to stable the market value of their currency. However, many cryptocurrencies like Bitcoin do not have this backup. Do you know what is the best site to trade Bitcoin? To know it click here.
What is forex trading with Bitcoin?
Let’s understand it by taking an example. Consider you have opened an account through a broker over forex trading, and the broker is accepting Bitcoin for forex trading. Transmit two Bitcoins from your wallet to that’s of brokers. Also, assume that the rate of US dollar to bitcoin is 1bitcoin is equal to $7,500. It will mean that you deposited £15000 in the wallet of the broker. And then consider that you want to have a position in the world of the British pound. And £0.5 is equal to $1, which is the exchange rate, you are going to have £7,500 in your account. And if bypassing time, the GBP/USD rate shifts to 0.45, luckily, you’ll receive a profit of 11.11% which can be easily cashed out. 11.11% profit means that your trading account is going to be square off to $1,666.5.
A very useful piece of advice for you is to never use clout until you know what you’re doing. And always use a forex brokerage which is regulated by your local authorities. There are few brokers who are using Bitcoin as forex trading. They include LiteForex, AvaTrade, and eToro.
What are the possible benefits?
Experts of forex trading with Bitcoin do offer clouts for trading Bitcoin. The gurus of trading can use this situation to their advantage. But for your good, you should be careful while dealing with any approach indicating high margins, as risk and loss always come with that.
Decentralization is a very good benefit of Bitcoin. Bitcoin is not linked with any central bank. Cryptocurrencies especially Bitcoin are independent of chief geopolitical effects and from macroeconomic subjects like country-specific price rises or interest rates
Less cost of trading
The brokerage cost offered by forex trading brokers of cryptocurrency is usually kept low. The reason is to attract and influence the clients.
Low deposition amount
Only a capital of $25 is required to start trading with forex trading using Bitcoin. Traders should do a deep evaluation of the broker before making any deposition. Check if the broker is legitimate, registered, and regulated or not. Because many of the forex traders try to attract clients by offering promotions and are not legitimate
No credit card detail or any kind of bank detail is required to make a transaction with Bitcoin, which makes it secure and safe. You get cost security along with financial security.
Exemption of global boundaries
Trading with Bitcoin knows no boundaries, as this currency is globally accepted now. You can do trading from England to New York to Asia. Though there are some regulatory measures, if both broker and trader are on the same page of the transaction, they’ll not face any restriction based on geography.
What are the potential risks?
The difference in the exchange rate
Different countries have different rates for exchanging Bitcoin by forex trading. You need to learn which rate is being used by your forex trader
Bitcoin is notorious for its high volatility. If there are no regulatory measures, brokers can misuse this volatility for its advantage, and traders will be at a loss.
Despite its independence from the central bank, security risks and issues are in the inheritance of Bitcoin. Hackers can hack deposited Bitcoins from both trader and brokers’ accounts. So always go for the broker which has insurance against theft.
Asset Class mixture
The Crypto world is a mixture of different assets, and each has its own mechanism of valuation. With forex trading, another ingredient adds to this mixture. This intermediate ingredient can add losses and profits unexpectedly anytime. So, it’s a risky job to do.
Risk of using U.S Dollar rate
Everybody wants to work in the currency of the United States. So, whenever trades using Bitcoin, the broker tries their best to sell Bitcoin at the US dollar rate. Even if the trader avoids it, he still must expose to Bitcoin US dollar risk at various stages from deposition of money to withdrawal of it.