The Foreign Exchange market (Forex) is the world’s center for exchanging currencies. Traders gauge currencies’ health and attempt to exploit its volatility in exchange rates with other currencies to make a profit. The more a currency varies, the bigger the profit (and risk). Bitcoin trading is similar as traders are essentially exchanging a crypto currency for another currency, which is the principle forex is built on. However Bitcoin’s more unpredictable volatility and influential price-driving factors are divergent from forex.
Bitcoin was created in 2009 as an anonymous and secure way of exchanging money on the internet. It is an electronic currency that is completely decentralized - it isn’t backed by a government or other central authority – and is minted and exchanged entirely within a massive network of users. Anyone with an internet connection can send and receive Bitcoins directly and privately with no transaction fees. The first crypto currency to bring in more investors and traders than its rivals, possibly due to its temperament of having a lot of ups and downs in the market which make it attractive to traders.
Forex trading with Bitcoin comes in two ways. You can either trade forex using Bitcoin or buy contracts for the price pair of Bitcoin and a fiat currency. But whichever you pick, the basics of online forex trading remain the same. In forex trading, you are investing in the price movements of one currency against another. You will see pairs like EUR/USD, USD/JPY, or GBP/USD. In some online brokers, you’ll also see the BTC/USD pair. These are the contracts you need to invest in. Choose your preferred currency pair then buy a contract for long-term trades. You can also sell the contract later on, but this depends on the price movements on the market.
Investors make money of fluctuations in markets. Generally, the more volatile prices for an investment are the more opportunities there are to make and lose money. This is why Bitcoin forex trading is becoming more and more popular. At the moment the amount of speculation and number of concerns surrounding the currency mean that Bitcoin prices are highly volatile. This makes Bitcoin an investment vehicle more similar to stocks, commodities, and other highly speculative investments – giving it the ability to gain larger profit (and loss).
Trading forex with bitcoins essentially introduces a new intermediate currency which can impacts profit and loss in unexpected ways. Bitcoin and currencies have many similarities, but their divergent behavior says otherwise. Measuring one order of magnitude higher than that of forex, Bitcoin’s volatility is an intense contrast from the variance of foreign currency. Despite the fact that a forex trader could have some success trading Bitcoins using forex fundamentals, Bitcoin has created a riskier trading market that has yet to reach its potential.