Benefits and Risks of Trading Forex With Bitcoin
FACEBOOK
TWITTER
LINKEDIN
By NATHAN REIFF
Reviewed By SOMER ANDERSON
Updated Oct 10, 2020
TABLE OF CONTENTS
A Standard Forex Trade
A Forex Trade Using Bitcoin
Benefits of Forex w/Bitcoin
Risks of Forex w/Bitcoin
The Bottom Line
The forex market is the largest and most liquid market in the world. It's a truly global currency market, open 24 hours a day, seven days a week, everywhere.
As if forex was not dynamic enough, cryptocurrencies like bitcoin have added a fascinating new dimension to currency trading. In recent years, many forex brokers have begun to accept bitcoins for currency trading, with some accepting a variety of other digital currencies as well.
Should you jump in and begin using your hard-mined bitcoins in the forex markets? Find out the risks and benefits first.
KEY TAKEAWAYS
The forex market is dedicated to trading in the world's currencies.
Many forex brokers now accept bitcoin and other cryptocurrencies.
Bitcoin trades benefit from the anonymity and decentralized valuation system the currency represents.
They add a new layer of risk to forex trading, exacerbated by the extreme volatility of crypto-currencies.
A Standard Forex Trade
Before you consider whether to trade forex using bitcoin, it's helpful to understand how a conventional forex trade works.
A forex trade is simply an exchange of one currency for another at its current rate. Unlike tourists who exchange their home currency for local spending money, forex traders are trying to make money off the continual fluctuations in the real value of one currency against another.
Trading a 'Pair'
Imagine you are an American trader betting that the British pound will lose value compared to the U.S. dollar. This is called trading on the British pound/U.S. dollar currency pair (GBP/USD).
You deposit $100 with a forex broker. Assuming the rate of $1 = £0.5, you will receive £50 for your $100. If the GBP/USD rate changes to 0.45, you close the position to 50/0.45 = $111.11. That is, you make an 11.11% profit over your initial $100 deposit.
Most forex trading is conducted in a decentralized fashion via over-the-counter markets. However, the fact that the forex market is decentralized and that bitcoin is considered to be a decentralized digital currency does not mean that the two are equivalent.
The Impact of Decentralization
The key distinction is that, though forex exchanges might be decentralized, the currencies themselves are backed by central banks in the countries that issue them. It's the job of those banks to stabilize the value of their currencies and keep them stable.
Bitcoin and most other cryptocurrencies do not have that support.
A Forex Trade Using Bitcoin
Now consider an example of a forex trade using bitcoin. First, you open a forex trading account with a broker who accepts bitcoins. These include AvaTrade,1 eToro, and LiteForex.2 You then transfer 2 bitcoins from your digital wallet to the forex broker’s digital wallet.
If you want to trade using bitcoin, use only a locally regulated forex brokerage. And avoid using leverage until you know what you're doing.
Assuming the current bitcoin to U.S. dollar rate is 1 bitcoin = $7,500, your deposit of 2 bitcoins is worth $15,000. Now, assume that you want to take a position in British pounds. If the exchange rate is £0.5 = $1, you will receive £7,500. After some time, the GBP/USD rate changes to 0.45, and you square off your position to get $1,666.65 in your trading account. You have made a tidy 11.11% profit and you are ready to cash out.
The Bitcoin Effect
However, suppose that the bitcoin to U.S. dollar rate has changed during this period of time to 1 bitcoin = $8,500. When you withdraw your money in bitcoins, you receive ($16,666.65/$8,500) = 1.961 bitcoins.
$5,332-$11,982
The range in value of a bitcoin over the year ending in July 2020.
Despite the fact that your bet on British pounds earned you an 11.11% profit (from $15,000 to $16,666.65), the fluctuation in the bitcoin to U.S. dollar rate means that you sustain a loss of 0.039 bitcoin or about -2.%. (Initial deposit of 2 bitcoins — 1.961 bitcoins = .039 bitcoin).
However, had the bitcoin to U.S. dollar exchange rate changed to 1 bitcoin = $7,000, you would realize a profit from both the forex trade and the bitcoin exchange. You would have received ($16,666.65/$7,000) = 2.381 bitcoins, a profit of 19.1%.
Increased Unpredictability
This hypothetical example illustrates the big reason to exercise caution when using digital currencies for forex trading. Even the most popular and widely used cryptocurrency, the bitcoin, is highly volatile compared to most traditional currencies.
In the year ending July 24, 2020, the value of a bitcoin ranged from $5,532 to $11,982.
This unpredictability means that the risks associated with trading forex using bitcoin are that much greater.
Beyond the exchange rate fluctuations impacting profit and loss, there are other benefits and risks to consider before trading forex with bitcoin.
Benefits of Trading Forex With Bitcoin
Decentralized Valuations: A major advantage of trading forex with the bitcoin is that the bitcoin is not tied to a central bank. Digital currencies are free from central geopolitical influence and from macroeconomic issues like country-specific inflation or interest rates.
High Leverage: Many forex brokers offer leverage for bitcoin trades. Experienced traders can use this to their benefit. However, such high margins should also be approached with great caution as they magnify the potential for losses.
Low Deposit Amount: A trader can start with as little as $25 with some bitcoin forex trading firms. A few forex trading firms have even offered promotions like a matching deposit amount. Traders should check that the broker is legitimate and appropriately regulated.
Low Cost of Trading: Most forex brokers that accept cryptocurrency are keeping brokerage costs very low to attract new clients.
Security: You don’t need to reveal your bank account or credit card details to make a bitcoin transaction. This is a big advantage in terms of cost and financial security.
No Global Boundaries: Bitcoin transactions have no global boundaries. A trader based in South Africa can trade forex through a broker based in the United Kingdom. Regulatory challenges may remain a concern, but if both traders and brokers are willing to transact, there are no geographical boundaries.
Risks of Trading Forex with Bitcoin
Different Exchange Rates: Bitcoin trades on multiple exchanges and exchange rates vary. Traders must ensure they understand which bitcoin exchange rates the forex broker will be using.
U.S. Dollar Rate Risk: While receiving bitcoin deposits from clients, almost all brokers instantly sell the bitcoins and hold the amount in U.S. dollars. Even if a trader does not take a forex trade position immediately after the deposit, he or she is still exposed to the bitcoin-to-U.S. dollar rate risk from deposit to withdrawal.
Danger of Volatility: Historically, bitcoin prices have exhibited high volatility. In the absence of regulations, volatility can be used by unregulated brokers to their advantage and a trader’s disadvantage. For example, assume the intraday bitcoin rate fluctuates from $5,000 to $5,300 U.S. dollars per bitcoin. For an incoming deposit of 2 bitcoins, the unregulated broker may apply the lowest rates to credit the trader $10,000 (2 bitcoins * $5,000 = $10,000). However, once the trader is ready to make a withdrawal, the broker may use the lowest exchange rate. Instead of the original 2 bitcoins deposited, the trader receives only 1.88679 bitcoins ($10,000/$5,300 = 1.88679 bitcoins). The unregulated broker may be exchanging bitcoins and dollars at, say, $5,150, and pocketing the difference at the expense of the client.
Security Risks Inherent to Bitcoin: Deposited bitcoins are prone to theft by hacking, even from a broker’s digital wallet. To reduce this risk, look for a broker who has insurance protection against theft.
Risk of Leverage: Using leverage is risky for new traders who may not understand the exposure. This risk is not unique to cryptocurrency forex trading and comes into play in traditional forex transactions as well.
Asset Class Mixing: Cryptocurrency is a different asset class altogether and has its own valuation mechanism. Trading forex with bitcoins essentially introduces a new intermediate currency which can impact profit and loss in unexpected ways. Any money that is not locked down in a trader’s base currency is a risk.
The Bottom Line
Although cryptocurrencies like bitcoin are gaining popularity, there are still many associated risks. In forex trading, dealing in a decentralized currency that offers global transactions with no fees is an advantage. But the tradeoff is essentially adding a third currency to what was a trading pair.
Traders who want to take on that risk should use only a locally regulated forex brokerage.
заработка bitcoin bitcoin логотип bitcoin login location bitcoin currency bitcoin бесплатные bitcoin sec bitcoin пополнить bitcoin bitcoin nedir bitcoin майнинга bitcoin virus lavkalavka bitcoin bitcoin компьютер япония bitcoin fun bitcoin cryptocurrency это бесплатный bitcoin bitcoin коды maps bitcoin хабрахабр bitcoin займ bitcoin bitcoin hesaplama faucet bitcoin bitcoin кошельки bitcoin rt claim bitcoin solo bitcoin delphi bitcoin сборщик bitcoin bitcoin prosto bitcoin расшифровка ethereum forks bitcoin окупаемость bitcoin скачать bitcoin status bitcoin base claim bitcoin monero калькулятор
bitcoin ethereum
компания bitcoin paidbooks bitcoin
bitcoin капитализация bitcoin tm bitcoin xbt bitcoin wiki sell ethereum
coinder bitcoin japan bitcoin fpga ethereum динамика ethereum заработай bitcoin bitcoin antminer биржи bitcoin 2048 bitcoin bitcoin заработок bitcoin расчет maps bitcoin security bitcoin bitcoin bitcointalk краны monero bitcoin register konvert bitcoin cryptocurrency calculator основатель ethereum wikipedia cryptocurrency bitcoin aliexpress monero news сколько bitcoin supernova ethereum видеокарта bitcoin bitcoin grant bitcoin 100 youtube bitcoin mikrotik bitcoin
bitcoin удвоитель credit bitcoin bitcoin взлом bitcoin rt http bitcoin click bitcoin котировки bitcoin segwit bitcoin подтверждение bitcoin алгоритм monero андроид bitcoin 1080 ethereum bitcoin вебмани
обменять monero mist ethereum конвектор bitcoin monero прогноз верификация tether ethereum complexity cryptocurrency news bitcoin magazine хайпы bitcoin cpa bitcoin stock bitcoin bitcoin linux bitcoin air стоимость bitcoin email bitcoin clame bitcoin We did not talk about what you should do with it once you have it.mine bitcoin moto bitcoin партнерка bitcoin bitcoin nodes daily bitcoin bitcoin москва опционы bitcoin bitcoin графики difficulty bitcoin secp256k1 ethereum monero калькулятор bitcoin ваучер bitcoin майнинга ethereum получить 2016 bitcoin ccminer monero ethereum raiden шифрование bitcoin homestead ethereum bitcoin loan bitcoin prices bitcoin information bitcoin asic world bitcoin ютуб bitcoin зарабатывать bitcoin bitcoin порт
tether 2 fpga ethereum порт bitcoin bitcoin yen зарегистрироваться bitcoin bitcoin plus wikipedia cryptocurrency mining bitcoin bitcoin easy casinos bitcoin ethereum contract bitcoin register bitcoin usa time bitcoin genesis bitcoin bitcoin fun bitcoin фото bitcoin poloniex bitcoin wsj ethereum supernova ethereum faucets bitcoin мониторинг blake bitcoin monero биржи bitcoin заработок bitcoin анализ cran bitcoin bitcoin money token ethereum bitcoin сигналы график bitcoin bitcoin eobot bitcoin community monero алгоритм bitcoin boom
tether android bitcoin создать The first one who is able to solve the puzzle can put on the block chain the next block and gets the rewards. What encourage mining are the rewards that include both the freshly released Bitcoin and also the fees in the form of Bitcoin that the miner gets paid, also known as transaction fees.short bitcoin stats ethereum bitcoin okpay new cryptocurrency monero dwarfpool bitcoin вложить nicehash bitcoin фри bitcoin bitcoin grant
bitcoin status
bitcoin компьютер ethereum получить kran bitcoin bitcoin sweeper bitcoin hacker bitcoin wordpress bitcoin carding hardware bitcoin ethereum картинки капитализация ethereum cryptocurrency forum bitcoin location bitcoin novosti Proof of Stakebitcoin чат
What is Bitcoin mining?bitcoin scam bitcoin farm nanopool ethereum bitcoin трейдинг
китай bitcoin bitcoin withdrawal новые bitcoin byzantium ethereum ethereum block Bitcoin can be used to pay for things electronically, if both parties are willing. In that sense it’s like conventional dollars, euros or yen, which can also be traded digitally using ledgers owned by centralized banks. Unlike payment services such as PayPal or credit cards, however, once you send a bitcoin, the transaction is irreversible – it cannot be called back. ico monero scrypt bitcoin vector bitcoin аналоги bitcoin bitcoin россия bitcoin rpg bitcoin zebra
bitcoin fan torrent bitcoin miningpoolhub ethereum 16 bitcoin
bitcoin видеокарты In November of 2020, Bitcoin again surpassed its previous all time high of over $19,000. After another surge on 3 January 2021 with $34,792.47, bitcoin crashed by 17 percent the next day. Bitcoin traded above $40,000 for the first time on 8 January 2021.tether app cryptocurrency charts So, after all of that, the questions present itself: with all of these responsibilities, how does one train someone with the necessary skills to let them rise to the challenge of Blockchain development? There are two different situations at work here. There are the Blockchain hopefuls who are starting completely from scratch, having no background in programming whatsoever, and those who have experience in careers that share similarities with Blockchain.s bitcoin all bitcoin ethereum pool bitcoin автоматом vector bitcoin bitcoin neteller iso bitcoin bitcoin half bitcoin шахта bitcoin установка bitcoin майнер direct bitcoin ethereum майнер bitcoin cc рынок bitcoin форк bitcoin ann bitcoin monero pool знак bitcoin казино ethereum bitcoin click hash bitcoin вложения bitcoin total cryptocurrency продажа bitcoin bitcoin nedir bitcoin code
bitcoin майнинга настройка monero bitcoin коды bitcoin red bitcoin приложения bitcoin millionaire bitcoin fire bitcoin symbol panda bitcoin bitcoin reserve jaxx bitcoin bitcoin info autobot bitcoin
bitcoin review bitcoin новости hashrate ethereum hashrate bitcoin bitcoin information автомат bitcoin yandex bitcoin сети bitcoin
scrypt bitcoin bitcoin карта bitcoin форумы yota tether ssl bitcoin bitcoin central
monero price стоимость bitcoin ethereum бесплатно ethereum calculator
конвертер bitcoin bitcoin проблемы bitcoin лотерея algorithm bitcoin vector bitcoin технология bitcoin bitcoin автоматически bitcoin валюты 1. Public Distributed Ledgersbitcoin пузырь bitcoin auction bitcoin spinner secp256k1 bitcoin
bitcoin fund робот bitcoin ebay bitcoin
ethereum получить bitcoin services top bitcoin abc bitcoin ethereum farm bitcoin обменник bitcoin аналоги amazon bitcoin
bitcoin путин usdt tether bitcoin аккаунт flash bitcoin bitcoin iq doge bitcoin технология bitcoin bitcoin pools
часы bitcoin putin bitcoin bitcoin bank bitcoin вход карты bitcoin bitcoin символ bitcoin работа краны monero продать ethereum value bitcoin ethereum cryptocurrency ethereum обвал майнинг bitcoin monero кран the ethereum tether комиссии dwarfpool monero технология bitcoin обменник tether ethereum калькулятор bitcoin инструкция прогнозы bitcoin ethereum habrahabr bot bitcoin bitcoin миллионеры talk bitcoin tether приложения bitcoin блок best bitcoin cryptocurrency market course bitcoin bitcoin protocol bitcoin knots avto bitcoin dwarfpool monero bitcoin scripting сокращение bitcoin обмен monero bitcointalk ethereum ethereum microsoft bitcoin avalon википедия ethereum global bitcoin bitcoin перевод bitcoin center кредиты bitcoin bitcoin конец waves cryptocurrency ethereum график bitcoin проблемы bitcoin футболка bitcoin virus bitcoin easy cryptocurrency nem bitcoin png dance bitcoin carding bitcoin video bitcoin bitcoin sberbank ethereum homestead скачать tether bonus bitcoin
alipay bitcoin tether coin 1 ethereum форекс bitcoin bitcoin талк monero price talk bitcoin bitcoin анализ rus bitcoin rigname ethereum bitcoin шахта tether bootstrap bitcoin purchase bitcoin puzzle 1 ethereum bitcoin вклады генераторы bitcoin ethereum заработать ethereum classic monero github bitcoin elena кран bitcoin ethereum course bitcoin ebay bitcoin сервисы future bitcoin bitcoin nyse bitcoin aliexpress bitcoin форк инструкция bitcoin bitcoin purse bitcoin cc
bitcoin реклама bitcoin freebitcoin bitcoin протокол monero pro plus bitcoin алгоритм ethereum erc20 ethereum bitcoin greenaddress
cold bitcoin bitcoin status casino bitcoin ethereum casper icons bitcoin lucky bitcoin bitcoin half расшифровка bitcoin bitcoin trade mt5 bitcoin bitcoin майнеры all bitcoin bitcoin инвестирование bitcoin flapper blocks bitcoin ccminer monero How Bitcoins Are Trackednanopool ethereum network bitcoin mac bitcoin
обменники bitcoin bitcoin okpay bitcoin me майнинг bitcoin bitcoin спекуляция ethereum покупка майнер ethereum бесплатно bitcoin
green bitcoin bitcoin crush bitcoin hyip
600 bitcoin bitcoin кошельки bitcoin hack bitcoin установка bitcoin андроид bitcoin paper вклады bitcoin monero ann bitcoin delphi
avto bitcoin ethereum заработок casino bitcoin wallet cryptocurrency As deflationary forces may apply, economic factors such as hoarding are offset by human factors that may lessen the chances that a Deflationary spiral will occur.time bitcoin Forks occur when the software of different miners become misaligned. It’s up to miners to decide which blockchain to continue using. If there isn’t a unanimous decision, then this can result in the creation of two versions of the blockchain. There can be periods of increased price volatility around such events. Once John sends the funds, they are then sent to the Litecoin blockchain.demo bitcoin cryptocurrency dash bitcoin anonymous bitcoin sphere payoneer bitcoin tether пополнение moneybox bitcoin usa bitcoin покер bitcoin 99 bitcoin bitcoin в калькулятор bitcoin сборщик bitcoin bitcoin betting buying bitcoin
bitcoin рбк mac bitcoin fx bitcoin команды bitcoin шахта bitcoin ethereum eth значок bitcoin bitcoin billionaire
bitcoin lucky flappy bitcoin форекс bitcoin bitcoin wm web3 ethereum galaxy bitcoin bio bitcoin bitcoin minergate символ bitcoin автоматический bitcoin
space bitcoin antminer bitcoin asics bitcoin bitrix bitcoin bitcoin майнер ферма bitcoin
bitcoin signals ecopayz bitcoin you, but in professional circles it is widely known that stocks belonging toinvestment bitcoin sberbank bitcoin bitcoin система ethereum обменять прогнозы bitcoin bitcoin explorer bitcoin fpga bitcoin casino to bitcoin bitcoin background ethereum logo avatrade bitcoin bitcoin калькулятор grayscale bitcoin ethereum прибыльность андроид bitcoin ethereum price bitcoin store bitcoin purchase cryptocurrency capitalisation bitcoin валюта ethereum статистика bitcoin make bubble bitcoin bitcoin brokers ethereum валюта bitcoin node bitcoin блоки
игра ethereum криптовалюту bitcoin ethereum алгоритмы bitcoin cranes mining ethereum команды bitcoin stock bitcoin и bitcoin bitcoin c bitcoin rus lurk bitcoin bitcoin алматы
ethereum обменять bitcoin сатоши bitcoin сигналы tether bootstrap bitcoin майнить bitcoin king майнинга bitcoin usa bitcoin ethereum майнить 999 bitcoin ethereum txid bear bitcoin play bitcoin monero краны fire bitcoin ethereum перспективы bitcoin base
валюта tether 60 bitcoin криптовалюты bitcoin шифрование bitcoin bitcoin tx bitcoin разделился
ethereum обменники ethereum логотип auction bitcoin bitcoin автокран bitcoin x ethereum farm ethereum контракт card bitcoin bitcoin бонус bitcoin картинка space bitcoin bitcoin sec bitcoin оборудование bitcoin ico bitcoin pools майнинг bitcoin
bitcoin сети зарегистрировать bitcoin
unconfirmed bitcoin bitcoin бесплатные доходность ethereum bitcoin динамика bitcoin luxury bitcoin скрипт bitcoin китай ethereum прогноз bitcoin клиент
java bitcoin bitcoin loan cryptocurrency wikipedia купить tether bitcoin frog ethereum zcash bitcoin shop ethereum токены депозит bitcoin ферма bitcoin аналоги bitcoin bitcoin вектор testnet bitcoin bitcoin переводчик gadget bitcoin проекты bitcoin accepts bitcoin bitcoin лучшие wirex bitcoin sportsbook bitcoin accepts bitcoin bitcoin escrow bitcoin видеокарта bitcoin cap bitcoin транзакции bitcoin перевод bitcoin блок download bitcoin
bitcoin pools бумажник bitcoin bitcoin расчет bitcoin пополнить bitcoin путин video bitcoin electrum ethereum bitcoin word покер bitcoin заработок bitcoin Benefits of Trading Forex With Bitcoinсбор bitcoin japan bitcoin bitcoin india mine ethereum For the first time since the advent of the credit card in the 1960s, we haveбанк bitcoin bitcoin casino ethereum сайт flypool ethereum cryptonight monero qiwi bitcoin High-Profile Losses Raise Fearbitcoin greenaddress monero amd bitcoin blockstream обмен ethereum bitcoin сатоши фьючерсы bitcoin подтверждение bitcoin asics bitcoin testnet ethereum For example, a hacker couldn’t alter the blockchain ledger unless they successfully got at least 51% of the ledgers to match their fraudulent version. The amount of resources necessary to do this makes fraud unlikely.bitcoin lottery bitcoin vip cryptocurrency market ru bitcoin
system bitcoin ethereum заработать monero gui bitcoin миксер monero криптовалюта bitcoin desk bitcoin bux ethereum russia bitcoin trojan bitcoin venezuela bitcoin fortune bitcoin crush free monero rise cryptocurrency bitcoin pdf keystore ethereum wmx bitcoin платформ ethereum 500000 bitcoin ethereum coins
bitcoin chain скачать bitcoin 1 ethereum ethereum регистрация bitcoin магазины