- Pros of Trading Forex with Bitcoin
- Cons of Trading Forex with Bitcoin
A Forex market is the largest and the most liquid market in the world. It is always operational like the cryptocurrency market. Many Forex brokers have started to accept Bitcoin for currency trading. Before we get into the pros and cons of Forex trading with Bitcoin it is important to understand what Forex trade is.
Forex trade in simple words is exchanging one currency for another at their present rate. In Forex trade, money is made by brokers from continual fluctuations in the real value of one currency against another.
Pros of Trading Forex with Bitcoin
- Valuations are decentralized: The biggest advantage of trading Forex with Bitcoin is that there is no regulating authority, like a bank or a government. Bitcoin prices are independent of macroeconomic issues of the country – like inflation or interest rates.
- Cross-border transactions: There are no boundaries that could stop a Bitcoin trader living in one country, to trade through a Forex broker, living in another country.
- Deposit amount can be small: With Forex trading firms an investor could start with just $25. A trader just needs to be aware of whether the broker is legitimate and properly regulated.
- Security: There is no requirement of providing your financial or bank details for Bitcoin transactions.
- Low cost of trading: Forex brokers that are accepting cryptocurrency have kept very low brokerage fees to attract more clients.
- Higher Leverage: Forex brokers offer leverage to Bitcoin traders. Experienced traders could use this to their advantage to make huge profits. Such margins must be approached with huge precautions as there can result in huge losses.
Cons of Trading Forex with Bitcoin
- The difference in exchange rates: The rate of exchange for Bitcoin can vary from exchange to exchange. A trader needs to ensure which exchange a Forex broker will use.
- The volatility of Bitcoin: Bitcoins prices have always been very volatile. This volatility of prices in the absence of regulations can be used as an advantage by brokers and work as a disadvantage to traders. As the broker may give a trader the lowest exchange rate at the time of withdrawal of currency than what it was.
- Security Risks: Bitcoins deposited in Broker’s digital wallets are prone to hacks. Broker that offers insurance protection against theft must be considered.
- Leverage Risk: For new traders, this could be a risky method, if not implemented with huge precautions.
- Asset class mixing: Cryptocurrency is completely different from other currencies as it has its valuation mechanism. Trading Forex with cryptocurrency introduces a new intermediate currency, which could have a substantial impact on profit and loss in unexpected ways. Any money which is not locked in the base currency of a trader is a risk.
Disclaimer: The article is just to provide information and shouldn’t be considered as any financial advice. It is advisable to conduct thorough research before investing in any cryptocurrency.
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