The forex market is the largest financial market in the world, with a daily average turnover of almost 5 trillion. There are a lot of people who trade currencies in the forex market and make a living off of it. However, the forex market is very volatile, and price fluctuations happen by the minute, making it a job for a professional, and for a person who has time for it. If that wasn’t hard enough, now traders are looking towards trading bitcoin in the forex market. Bitcoin is a decentralized cryptocurrency that has been around since 2009, and over the course of a decade, its value has increased manifold; now reaching a staggering rate of 19,260 US dollars for 1 bitcoin. So with such high value it seems like quite the attractive offer, but it has both advantages and disadvantages.
- Decentralised: Since bitcoin is a currency that does not have a central bank to regulate it, and since it has little to no transaction cost, it is a very attractive offer for traders.
- High Leverage: Forex traders often offer leverage for bitcoin traders, and traders with experience can take it to their advantage. However, larger the margin for gain, larger it is for loss as well so the trader needs to be quite careful while dealing with high margins.
- Low Initial Deposit: If the broker is legit and appropriately regulated, they can start the trader with prices as low as 25 dollars. The trader may even be offered promotions like a matching deposit amount.
- Low Brokerage: To attract new customers, most forex brokers reduce their brokerage amount to a very low amount.
- Security: A bitcoin transaction does not require the credit card information or bank details of the trader, because there is no regulatory bank system. This is a major advantage when it comes to personal and financial security.
- Zero Global Boundaries: There are no geographical boundaries in bitcoin trade because bitcoin is a global currency and is not affected by third party events.
- Exchange Rates: Exchange rates of bitcoin vary based on the website and so forex traders must know what the forex brokers might be using.
- US Dollar Rate Risk: Almost all brokers sell their bitcoins for US dollars while receiving deposits from clients. Even if the trader doesn’t take a forex trade position immediately after the deposit, they are still exposed to the bitcoin to US dollar conversion rate risk.
- Volatility: Bitcoin rates are highly volatile because of the lack of regulation. This lack of regulation can be easily exploited by unregulated brokers and put the trader to a disadvantage.
- Bitcoin Related Security Issues: Bitcoin is a digital currency and therefore if someone hacks into your wallet, it can be gone forever. So it is best to consider a broker who has insurance protection against theft.