The origins of Bitcoin date back more than a decade now. Since its inception, it has established itself as the standard-bearer of a generation of cryptocurrencies. It’s the best known – and one of the most popular. As such, it has gained a foothold on the international currency market and adds a new dimension to the exchange. But what are the benefits of adding it to your portfolio?
Unlike trading currency pairs on the forex market, Bitcoin is a digital currency that’s completely independent of any government or central bank. This ‘decentralization’ is one of the major plus points for many Bitcoin traders. It means it’s unaffected by shifts in monetary policy. But it also means nothing can step in to stabilize its value if the need should ever arise.
The advantages of trading Bitcoin
Decentralisation is one feature of trading Bitcoins that underpins its appeal. But there are other key advantages for investors who are thinking about adding a cryptocurrency to their portfolio.
Forex and commodities are two global markets in which investors hone their skills and develop their strategies. But the addition of Bitcoin can take things to the next level – minimising your overall risk, while maximising the potential for attractive returns.
Bitcoin (and other cryptocurrencies) use blockchain technology, where a network of computer records and validates each transaction. And each transaction is made known to the public. For an investor, it offers extra security as Bitcoin cannot be manipulated by an external source.
As a digital-only currency, Bitcoin can be transferred across borders at any time of day. And its value is the same in the UK as it is, say, Canada. As such, investors can opt to trade forex with Bitcoin using a broker anywhere in the world – or send Bitcoin to others in different locations.
Risk and volatility
Bitcoin benefits from significant volatility, which increases opportunities for investors to achieve attractive returns. After PayPal revealed it would add cryptocurrencies in October 2020, Bitcoin intensified its bull run to go above $13,000 – before falling back under intense selling pressure.
What do you need to think about?
With all forms of trading, there are factors that any potential investors need to consider. In the case of Bitcoin, its increased volatility is born out of the fact there is a limited supply of coins – and the majority of that supply has already been mined. And that volatility means there’s more risk to contend with. You should, therefore, put a robust risk management strategy in place.
Bitcoin also remains in its relative infancy as a trading instrument. It continues to cause issues from a regulatory perspective, for example, with different countries taking different stances. It also suggests that its true price is still to be revealed.
Being equipped with the facts before investing is always a useful starting point when deciding if Bitcoin is right for you. For all the risks involved, there are also rewards. And knowing what the risks are can avoid any costly decisions.
There are good reasons why Bitcoin is proving to be an attractive option for conventional forex traders. And these might make it the choice for you too.