With the advent of technology and the internet, many investment opportunities are coming up. Bitcoin is among the trading options that have come up in recent times and continue to attract many people looking for investment. However, not many people know how trading forex with Bitcoin works. Some investors remain speculative of this virtual currency and others using the same technology. Bitcoin is simply, a digital floating currency exchange attached to the US dollar like in any foreign exchange business.
The most troubling bit with bitcoin for many traders is the lack of a physical asset upon which its price is based. All the same, bitcoin continues to remain valuable and popular among all cryptocurrencies available in the digital currency market today. This is more especially in the trade exchange market. Its constant fluctuation since its launch in 2009 makes it attractive for traders, especially in the forex market.
Understanding Bitcoin and its Use in Trade
Bitcoin has for some time now faced some opposition in its use as a legal tender and the debates continue in the market today. Even with that, various trading platforms are helping with online exchanges involving bitcoin. This has been made possible through cryptocurrency Forex brokers that help traders navigate the market. The biggest concerns by investors are the security and trading costs involved but there are genuine platforms helping traders.
Participants in the global markets value the US dollar more than any other currency and that is why the Japanese exchange Mt. Gox had largely adopted bitcoin in the payment process in renowned US outlets. This sparked a lot of debate on whether bitcoin should be taken as a legal tender. All the same, financial regulators have not yet bought the idea of terming bitcoin a currency that we can trade with. It is only considered an asset of value.
The continued use of bitcoin has led to the emergency of a multi-billion industry that makes it possible for individuals to trade with bitcoin across various exchanges. Some brokers allow bitcoin trading as part of the services they offer in forex trading. However, investors should get to know what it means to trade with bitcoin alongside how forex trading works.
Forex Trading vs Bitcoin Trading
Bitcoin trading and forex trading are comparable in various ways despite having a few differences. The digital and paper currency value is based on the universal metrics of supply and demand. With the increased demand for bitcoin, the price shoots up and as it falls, the price also falls. On the contrary, bitcoin is not influenced by the uncertainty of supply from foreign central banks.
The mining of bitcoin is done at a predictable rate but changes in monetary policies can create major swings in the price of currencies. The value of bitcoin is connected to the basics of the cryptocurrency ecosystem. On the other hand, forex issues are connected to the economic situation and decisions of the participating nations and their currency.
Trading bitcoin can involve the use of dollars on the exchanges just the way euros can be traded for dollars in forex. However, there is a difference because bitcoin is virtual. It is often referred to as a currency but it is not dynamic like other trading currencies in the market. Think of bitcoin trading like owning equity in the stock exchange. At the moment, trading is based on speculation about a rise in bitcoin price. There is little derivative work trading with bitcoin compared to market currencies used in forex exchange.
The main difference between forex trading and bitcoin trading is on grounds of liquidity. Forex trading is in the tune of trillion US dollars whereas the bitcoin market is stuck in the billions. The latter is a small market with a high chance of experiencing a much more volatile trading environment than the forex market. Big swings in prices can be experienced during small macroeconomics events.
Bitcoin continues to grow in popularity and is now an alternative to other investments especially in the forex market. Forex brokers have been trading forex with bitcoin to increase their offerings and have slowing been taking shape. It is important to note that bitcoin is not based on a nation’s macroeconomics but the trading platform and reactions to the changes in global economics.