Traders

Did You Know The Benefits And Risks Of Trading Forex With Bitcoin?

The forex market is the world’s largest market running 24*7 all over the world. In this article, we shall cover the risks and benefits of trading forex with bitcoins.

Written by: Jacob Okonya

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Jacob Okonya

Jacob has been engaged in blockchain technologies, Bitcoin, and fintech. He worked mostly as a blockchain market researcher, fintech journalist, and online forum moderator. Jacob is involved in creating articles and educational content for different project components, explaining how users can utilize the various resources.

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Dec 20, 2018

The forex market is the world’s largest market running 24 hours a day and 7 days a week all over the world. However, forex is not dynamic enough prompting the uses of Bitcoin in currency trading. In this article, we shall cover the risks and benefits of trading forex with bitcoins. In a standard Forex Trade, users deposit the amount they wish to trade with their forex broker. Let’s consider an American trader betting on a pound sterling/USD currency pair (GBP/USD). He would deposit for instance $100. Assuming the exchange rate is $1 =£0.78, he would receive £78 for the $100 deposit. If the GBP/USD rate changes to 0.7, he receives 78/0.7 =$111.42. Meaning the trader made 10.25% profit over the initial $100 deposit. On the other end, forex trading using Bitcoin involves opening an account with a broker who accepts bitcoin (like Ava Trade, Etoro or Liteforex). The trader can then deposit bitcoin into the broker's wallet. Assuming a bitcoin is valued at $4000, a customer who deposits 0.5 bitcoin gets $2,000. If the trader takes a position in British Pounds. Assuming the exchange rate is £0.78 = $1, the trader gets 1560. When the GBP/USD rate changes to 0.7 the trader gets $2,228.57. This price is further subject to the changing prices of Bitcoin. Supposing bitcoin rise to $4,600, the trader gets 0.484 BTC. Exchange rate fluctuation of bitcoin significantly affects profits and losses, however, there are other benefits and risks associated with trading forex with BTC. Benefits of Trading Forex with Bitcoin

Benefits of Trading Forex with Bitcoin

1. No Central Control

One of the most important advantages of trading forex with bitcoin is that there is no central bank to randomly change bitcoin valuations. Decentralization makes the bitcoin market independent of geopolitical influences. Macroeconomic issues like country-specific inflation or interest rates too do not affect bitcoin. Bitcoin attracts high leverages ranging up to 1:1000. This can be utilized by experienced traders to gain high profits. However such high margins increase the potential of making losses.

2. Zero Transaction Fees

All Bitcoin transactions are automatically recorded on a public blockchain. This process does not involve any banks or clearing agencies. This makes bitcoin transactions extremely cheap to execute worldwide. This allows brokers to charge a zero withdrawal or deposit fees on bitcoin transactions thus improving profits. A ...
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