Bitcoin is no longer a novelty. After more than a decade since its release, it has found acceptance in the trading community because of its unique features. Its features, such as a decentralised network and cryptographic security, make it a prominent trading instrument. Did you know that you could do forex trading with Bitcoin? By trading Bitcoin with fiat currencies such as USD, CAD, and JPY, you could open a whole new trading world with ample opportunities for you. This, too, is without any limitations, as Bitcoin trading is possible 24/7.
You can rely on a currency calculator to stay updated about the Bitcoin-fiat exchange rate, as it will give you the real market price to help you decide how much fiat currency you need to trade a certain amount of Bitcoin. Now, let’s see how Bitcoin works and what advantages you could get from trading forex with Bitcoin.
Why Bitcoin?
Before we get into the benefits of forex trading with Bitcoin, you need to understand what Bitcoin is. Bitcoin is a digital currency; it does not exist in the real world. Under the alias “Satoshi Nakamoto,” an individual or group of individuals created this digital currency.
What makes Bitcoin different from normal currencies is that nobody can counterfeit it. Existing as an entity that can’t be double-spended, Bitcoin is secure because of cryptography.
Moreover, Bitcoin is not linked to any central bank; therefore, macroeconomic issues do not influence it directly. As a part of a decentralised system, users get anonymity, which adds a layer of security.
Today, most forex brokers offer bitcoin and other cryptocurrencies to trade. With the help of leverage, you can trade Bitcoin, further increasing your profits.
Bitcoin has no link to traditional currencies. Its dynamics work differently than those of fiat currencies. The latter are influenced by social, economic, and political events.
You could say that fewer factors impact cryptocurrencies. This reduces the work of traders in figuring out where the price of Bitcoin could be headed.
However, this doesn’t mean that trading Bitcoin is easy. Because of its high volatility, it is equally or more challenging to trade it than your traditional currencies. Therefore, you should plan properly before opening a trade. A good thing is that you can get an idea of the profit you could make before doing so.
This is possible with the help of a profit calculator, which quickly provides data about the estimated profit based on the lot size and the instruments traded.
The Benefits of Trading with Bitcoin on Forex
Here are some benefits you will get for trading Bitcoin on Forex
1. Security
Bitcoin is not a secured cryptocurrency for many reasons, the number one being its decentralised nature, which means no single network controls it. If you have bitcoin, you are fully in control of it.
Moreover, your data is protected with the help of cryptography, and two parties can only initiate transactions if they have the keys. Additional levels of security, including hashing, game theory, mining, etc., are added by blockchain.
2. No Geographical Boundaries
Bitcoin is accessible to everyone, regardless of the country and region. So you can engage in trading with Bitcoin along with forex currency pairs without worrying about the location you live in. This provides traders with ample opportunities to make the most of this cryptocurrency.
3. Higher leverage on Bitcoin trading
Leverage and the market’s higher liquidity are the reasons why traders choose forex. With a small trading deposit, you can open a big trading position and earn a higher profit. You could take advantage of the same feature when performing Bitcoin trading, which multiplies the earning potential of traders.
4. Lower cost
Bitcoin trading is affordable. With capital as low as $25, forex brokers can give you a trading account that requires a small deposit. So, if you don’t have a high budget or want to take things slowly, you could choose a broker that offers the minimum deposit requirement suitable for your needs.
5. Absence of transaction costs
When you execute trades with fiat currencies, you are liable for transaction costs. However, transaction costs are absent when you use Bitcoin for forex trading. As a result, you can increase your profits while saving on additional costs.
6. Used as a hedge against traditional currencies
There is no interlink between the prices of fiat currencies and Bitcoin. If the price of fiat currencies goes down, this may not happen with Bitcoin. Therefore, during times of inflation or high volatility, you could rely on Bitcoin, holding it for a longer duration.
Think of it as a diversification strategy where your trading account will not face a heavy blow and can see some increment in profits.
7. Balancing the Risks with the Rewards
Although trading with Bitcoin can be high-rewarding, we can’t deny the risk it carries. Bitcoin is a highly unstable currency, and though it has found some stable ground in the last few years, its prices can still go up and down rapidly.
Hence, trading them is much riskier than trading fiat currencies—moreover, the Bitcoin-to-fiat currency exchange rate shifts briskly, which adds additional risk to traders. Apart from volatility risk, other risks that you will find in trading Bitcoin are – exchange rate risk and broker risk.
If you open your trades during high volatility times, make sure that you do so with proper planning and targets. Use a profit calculator to set your target profit. Your profit expectations should be realistic and small. The profit calculator will help you set goals that align with your risk tolerance so you will be able to exit on time, gathering your profits.
In The End
Trading Bitcoin alone gives traders plenty of opportunities. And, if you combine it with forex, you get a multitude of opportunities. Some of the things that make forex trading with Bitcoin worthwhile are security, global accessibility, and lower costs. You don’t have to worry about the prices being controlled, as Bitcoin is not under central authority. To try this fusion of trading, you need a strategy specific to it. Therefore, you should first research the pairs you want to trade and test your strategy on a demo trading account.
*The information in this article does not necessarily reflect the views of The Global Hues. We make no representation or warranty of any kind, express or implied, regarding the accuracy, adequacy, validity, reliability, availability or completeness of any information in this article.*
