The forex market happens to be the most liquid and largest in the globe. It is a world currency market that remains open 24/7 at all days of the week and everywhere. Forex was dynamic to start with, and now cryptocurrencies have put an amazing new dimension to this currency trade. In the past couple of years, many of the forex brokers have started accepting bitcoins for trading. In fact, a few of them even accept other types of digital currencies.
But should you go ahead and start using those bitcoins and altcoins in the forex market? Let’s understand the benefits and risks first.
Benefits of using bitcoin for forex trading
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Decentralized valuation:
The top advantage of forex trading with bitcoins is that the digital currency isn’t tied to one central bank. They are free from the geopolitical influences and macroeconomic issues, such as country-specific interest rates or inflation.
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Higher leverage:
Some forex brokers provide leverage for bitcoin trading. Expert traders tend to utilize this aspect to their advantage. But such higher margins need to be cautiously approached because there is a greater potential for loss.
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Lower deposit amount:
As per News Spy, traders can begin with just $25 in some of the bitcoin-forex trading places. Many trading firms have also started offering matching deposit amounts. However, it’s important to check the authenticity of the trader.
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Lower cost of trading:
Most of the forex brokers have low brokerage costs to attract newer clients.
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Security features:
There is no need to disclose your credit card or bank account details for making bitcoin transactions. It is a major benefit when it comes to financial security.
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Zero world boundaries:
There are zero global boundaries in bitcoin transactions. Traders from South Africa can choose a broker from the UK for forex trading. Regulatory hurdles might be a factor, but there aren’t any geographical boundaries if the brokers and traders are willing.
Risks of using bitcoin for forex trading
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Various exchange rates:
Bitcoin trading on different exchange rates tend to vary. The traders need to make sure they know the bitcoin exchange rates their forex broker will use.
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American dollar rate risks:
While getting bitcoin deposit from the clients, all brokers instantaneously sell their bitcoins and keep the amount in American dollars. When traders don’t take forex trading positions right after making deposits, they still need to face the rate risk from the bitcoin to American dollar.
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Dangers of volatility:
Bitcoin prices, historically, have shown higher volatility. In the lack of regulations, unregulated brokers can use the volatility for their benefit and the disadvantage of traders.
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Security threats related to bitcoins:
Bitcoin deposits are easy to hack, even from the digital wallet of a broker. For reducing the risk, it’s better to go for brokers with proper insurance protection.
The endnote
Though bitcoins are becoming popular, the associated risks still exist. In case of forex trades, using decentralized currencies that offer worldwide transactions with zero fees is beneficial. However, tradeoffs are basically adding another currency to the trading pair. You can get in touch with your crypto broker to know more about this.
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