Bitcoin is arguably the most popular cryptocurrency currently. It is also the most valuable token on a cryptocurrency exchange. Each year we hear a surprising number about the price of Bitcoin. On the other hand, we have Forex trading. Forex is an open market for everyone to trade in different currency pairs and commodities.
If you are looking to invest in Forex trading and have a little bit of knowledge about crypto trading, then this article is for you. We will extensively go over Bitcoin trading on the Forex platform. So fasten your seat belts and go over everything you need to know.
Is Bitcoin a currency that you can trade on Forex?
Forex platform allows traders to trade in different currency pairs. That is why when it comes to trading Forex with Bitcoin, an important question arises, is Bitcoin recognized as a currency? The answer, unfortunately, is not a simple yes or no.
The debate about Bitcoin being a currency has gotten mainstream since the huge rise in its price. In many countries like the United States of America, Bitcoin is also used as a form of payment. However, there are other incidents, such as the cyber attack of Japanese exchange.
Unlike the most popular currencies such as Euro, USD, CAD, or Yuan, Bitcoin is not traditionally considered a currency. Most Forex regulatory authorities view Bitcoin as an asset of value.
Since the establishment of Bitcoin in 2009, it has created a multi-billion dollar industry. Bitcoin is a decentralized token that you can buy or sell across different trading platforms. Most Forex brokers allow trading Bitcoin on Forex trading platforms.
Now that you know the position of Bitcoin as a currency on Forex trading, let’s move on to the trading process and analyze it.
Bitcoin Trading on Forex Market
Many popular brokers allow traders to trade on the Forex market with a bitcoin-based account. However, there is a catch to this process. The United States financial authorities don’t allow CFDs (Contracts for difference). The Financial Conduct Authority (FCA), which is the United Kingdom’s financial regulatory authority and looks over most of the Forex brokers in the EU, has also issued a warning to investors about Bitcoin and other tradings of this sort on the Forex Platform.
The majority of the brokers have included Bitcoin on their platform. However, the complete functionality of these brokers is unclear. Several brokers allow trading Bitcoin on their platform for their traders. They can sell and buy bitcoins, but that’s it. Brokers don’t offer anything more than simple trading for Bitcoin.
Most currencies like we mentioned USD, Euro, etc., are backed by the country’s central banks. For example, British Pound is backed by the Government and state of the United Kingdom.
Bitcoin is a decentralized currency, which means that it is not owned or backed by any authority in the world. Hence, no one controls Bitcoin. There are certain advantages and a few drawbacks of this decentralization for Forex traders.
How does Bitcoin trade work on Forex
Let’s see how Bitcoin trading works on the Forex market. We will try to explain this through an example to understand.
First, you will need to open an account with a broker who supports Bitcoin trading. Then, you will transfer some amount of Bitcoin from your digital cryptocurrency wallet to your Forex account.
Let’s say one bitcoin is 7500 USD. You deposit two bitcoins in your account, that’d be 15000 USD. If the exchange rate of GBP/USD is 0.5 and you want to take a position on it, you will receive 7500 USD. Now after some time has passed, the GBP/USD exchange rate has changed to 0.45. If you square off at this point, you will get almost 1666 USD. You just made an 11% profit, and you can cash it out right away.
Volatility and unpredictability
Forex trading requires a lot of caution because of the unpredictability factor. Because even the slightest changes in the rate of a currency can make a big difference, this is a huge concern when you are trading with Bitcoin. Bitcoin is a very volatile currency, and it can gain or lose its value very unpredictably.
In 2020, bitcoin ranged from 5000 USD to 12000 USD. Now, in 2022 Bitcoin is almost over 50000 USD. Thus, you can see the huge price shifts that Bitcoin experiences, making it very risky for Forex trading.
To answer our readers’ question that it is better to trade FX with Bitcoin, let’s look over some advantages that you will get.
Unlike other currencies, a state or government does not hold and control cryptocurrencies. Thus, geopolitical issues or macroeconomic issues will not affect the price of Bitcoin.
Many brokers offer higher leverage rates for Bitcoin trading. However, there is also an increased risk of higher losses with higher leverages.
- Deposit amount
When trading Bitcoin on Forex, you can start with around 25 USD. The deposit limits are usually lower for Bitcoin trading on Forex accounts.
- Security and anonymity
Bitcoin doesn’t require you to reveal your bank accounts or details. You can stay anonymous, and your financial security is not compromised.
There are certain disadvantages to trading with Bitcoin on Forex.
- Variable exchange rates
Bitcoin is exchanged on multiple exchange platforms. However, the exchange rates are not uniform, and they can vary.
- Risk of volatility
Bitcoin can increase its worth or lose it massively. Hence, the trader may have to bear a high risk of volatility.
- Risk of cyber attacks
It would help if you made sure to trade with trusted brokers; otherwise, your digital wallet may be prone to hacking.
Risk of high leverage
The forex market has a high leverage risk. When trading Bitcoin on the Forex market, the leverage risks are even higher.
If you are looking for a broker to trade Bitcoin with, here are a few great and secure options;
Crypto trading and Forex trading are very popular nowadays. Many people are looking to trade Forex with Bitcoin. There are some major benefits of trading Bitcoin with Forex, which is a desirable option. However, there is an increased risk of trading cryptocurrency with Forex. Thus, we suggest using regulated and local brokers for Bitcoin trading with Forex.
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