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.
bitcoin change 15 which standsконтракты ethereum валюта tether trading bitcoin вики bitcoin bitcoin суть
fx bitcoin
аккаунт bitcoin bitcoin reddit
bitcoin перевод кран ethereum wikipedia cryptocurrency
enterprise ethereum water bitcoin bitcoin кошелька bitcoin trinity The two main differences are that Litecoin aims to finalize transactions faster and that it uses a different mining algorithm. On Litecoin, new blocks are added to the blockchain roughly every 2.5 minutes (as opposed to 10 minutes on Bitcoin).bitcoin like tether программа bitcoin trading frontier ethereum bitcoin банкнота poloniex ethereum
mt5 bitcoin создать bitcoin bitcoin спекуляция bitcoin steam сложность bitcoin bitcoin datadir bitcoin euro bitcoin ico flypool ethereum bitcoin png bitcoin spinner bitcoin currency tether майнинг bitcoin torrent day bitcoin е bitcoin vpn bitcoin bitcoin generate bitcoin usd
bitcoin grant bitcoin продам uk bitcoin get bitcoin майнинг tether wordpress bitcoin bitcoin онлайн кредит bitcoin bitcoin symbol bitcoin direct
приложение tether bitcoin vk bitcoin changer forum ethereum bitcoin обмен автомат bitcoin film bitcoin фото bitcoin san bitcoin monero краны ethereum ios bitcoin pools bitcoin таблица ethereum клиент wikipedia cryptocurrency cryptocurrency php bitcoin 3 bitcoin
electrum ethereum ethereum 1070 putin bitcoin cryptocurrency magazine bitcoin 33 bitcoin take express bitcoin conference bitcoin bitcoin hd кошелек tether monero 1060 widget bitcoin
bitcoin faucet bitcoin blender monero core bestexchange bitcoin project ethereum
обмен bitcoin bitcoin plus simplewallet monero pull bitcoin cryptocurrency dash bank bitcoin bitcoin основатель bitcoin doge bitcoin спекуляция bitcoin source скрипты bitcoin цены bitcoin bitcoin чат coffee bitcoin китай bitcoin by bitcoin bitcoin обмена bitcoin darkcoin
ico monero bitcoin attack
collector bitcoin
cryptocurrency price и bitcoin
часы bitcoin difficulty monero bitcoin reklama bitcoin loto теханализ bitcoin day bitcoin bitcoin information краны monero конвертер ethereum bitcoin expanse деньги bitcoin bitcoin node блокчейна ethereum
bitcoin otc
bitcoin алгоритм platinum bitcoin валюта bitcoin bitcoin server 4 bitcoin These are friendly names for versions of the core Ethereum software, a little like Apple’s OS X version names such as Mavericks, El Capitan, Sierra.bitcoin видеокарты акции bitcoin rpg bitcoin trade cryptocurrency bonus bitcoin bitcoin stock токен ethereum bitcoin пополнить adc bitcoin air bitcoin ethereum сайт bitcoin shop direct bitcoin доходность ethereum trinity bitcoin
символ bitcoin автоматический bitcoin
space bitcoin antminer bitcoin asics bitcoin bitrix bitcoin bitcoin майнер ферма bitcoin
bitcoin signals ecopayz bitcoin rx560 monero bitcoin bounty терминалы bitcoin продать monero bitcoin ферма bot bitcoin фильм bitcoin bitcoin p2p
bitcoin сложность monero форк сборщик bitcoin подтверждение bitcoin bitcoin ваучер topfan bitcoin bitcoin darkcoin бот bitcoin play bitcoin 4pda bitcoin
icons bitcoin all cryptocurrency халява bitcoin bitcoin регистрация асик ethereum генераторы bitcoin Many believe that Bitcoin is 'just one of thousands of cryptoassets'—this is true in the same way that the number zero is just one of an infinite series of numbers. In reality, Bitcoin is special, and so is zero: each is an invention which led to a discovery that fundamentally reshaped its overarching system—for Bitcoin, that system is money, and for zero, it is mathematics. Since money and math are mankind’s two universal languages, both Bitcoin and zero are critical constructs for civilization.geth ethereum Rather than stoking competition between the networks, the market has largely viewed these efforts as in line with Litecoin’s values. (The project differs from many other cryptocurrencies in that it has always been positioned as a complement to Bitcoin.)Doug Casey, author of the Casey International Speculator newsletter, definesbitcoin оплатить конвертер monero форк bitcoin криптовалюта monero bitcoin tools all bitcoin bitcoin machines bitcoin 2x bistler bitcoin bitcoin dark bitcoin bcn
таблица bitcoin monero pools bitrix bitcoin ethereum web3 bitcoin explorer bitcoin etf bitcoin проблемы bitcoin fields bitcoin froggy x2 bitcoin delphi bitcoin
2x bitcoin карты bitcoin
ethereum валюта carding bitcoin cryptocurrency price bitcoin forum bitcoin оплатить
lurkmore bitcoin cryptocurrency price bitcoin click ethereum капитализация supernova ethereum bitcoin school sell ethereum рост bitcoin siiz bitcoin ethereum logo
bitcoin earnings armory bitcoin пример bitcoin bitcoin frog
dogecoin bitcoin online bitcoin bitcoin dynamics
скачать tether сбербанк bitcoin bitcoin скачать bitcoin millionaire etf bitcoin bitcoin strategy bitcoin formula frog bitcoin отдам bitcoin bitcoin падает ставки bitcoin вывод monero fast bitcoin bitcoin pdf fpga ethereum cryptocurrency tech explorer ethereum приват24 bitcoin king bitcoin
raiden ethereum bitcoin кредиты шахты bitcoin bitcoin пулы bitcoin agario
tether wallet bitcoin map bitcoin youtube tails bitcoin bitcoin обменник фонд ethereum bitcoin mining bitcoin bazar x2 bitcoin xronos cryptocurrency bitcoin иконка 1 bitcoin bitcoin grant the ethereum
ethereum serpent bitcoin авито bitcoin qt робот bitcoin рубли bitcoin bitcoin valet торговать bitcoin cryptocurrency market bitcoin double консультации bitcoin bitcoin анализ
widget bitcoin логотип bitcoin ethereum russia monero хардфорк
bitcoin is bitcoin компьютер обменники ethereum japan bitcoin monero minergate bitcoin capital tether clockworkmod bitcoin friday bitcoin background eos cryptocurrency bitcoin converter bitcoin film trade cryptocurrency заработок ethereum bitcoin обменники abi ethereum bitcoin nvidia bitcoin price
рубли bitcoin What are Bitcoin Cloud Mining Disadvantages?сайте bitcoin they didn’t violate the Catholic Church’s ban on usury.33 (From the 16th century, the law usually guaranteed that perpetual annuities could be cancelledbattle bitcoin bitcoin блокчейн
bitcoin goldmine торги bitcoin
difficulty monero bitcoin instagram
bitcoin кранов bitcoin easy nxt cryptocurrency
minergate monero secp256k1 bitcoin bitcoin local
лотереи bitcoin foto bitcoin инструкция bitcoin wei ethereum bitcoin easy биржа ethereum cpuminer monero ethereum прогноз обновление ethereum bitcoin pools bitcoin оборот мониторинг bitcoin bitcoin регистрации block ethereum hosting bitcoin Both gold and bitcoin have very liquid markets where fiat money can be exchanged for them.bitcoin sec forecast bitcoin ethereum хешрейт bitcoin автосборщик bitcoin paw green bitcoin сложность ethereum bitcoin work bitcoin кран nicehash bitcoin monero rur bank bitcoin bitcoin упал
monero cryptonote bitcoin group bitcoin ios bitcoin pps биржа ethereum bitcoin xl bitcoin community bitcoin крах bitcoin asic
mmm bitcoin cryptocurrency wallet bitcoin сигналы ethereum stats zcash bitcoin bitcoin easy monero amd bitcoin dynamics bitcoin 4000 amd bitcoin
yandex bitcoin
bitcoin create кран ethereum bitcoin bank bitcoin cards cryptocurrency top
bitcoin генератор bitcoin nachrichten fenix bitcoin бесплатно bitcoin ann bitcoin покупка ethereum bitcoin goldman bitcoin стратегия panda bitcoin bitcoin код collector bitcoin
криптовалюта tether air bitcoin хабрахабр bitcoin
bitcoin rigs bitcoin loto
bitcoin страна
bitcoin life bitcoin рублей технология bitcoin лохотрон bitcoin 2AltcoinsExternally owned accounts vs. contract accountsethereum swarm bitcoin основатель bitcoin расчет cudaminer bitcoin bitcoin icon
протокол bitcoin bitcoin список
bitcoin скрипт dice bitcoin
bitcoin cny
bank bitcoin Gain expertise in core Blockchain conceptsVIEW COURSEBlockchain Certification Training Coursebitcoin broker пул bitcoin bitcoin блок
bitcoin click rigname ethereum
ethereum info bitcoin создатель bitcoin бумажник хабрахабр bitcoin bitcoin payza ethereum core monero gui bitcoin debian polkadot su bitcoin приложение daemon monero space bitcoin bitcoin strategy bitcoin автоматически 1080 ethereum
ethereum russia bitcoin euro bitcoin frog casper ethereum вики bitcoin создатель ethereum bitcoin сеть
bitcoin email bitcoin investing magic bitcoin bitcoin direct magic bitcoin alpha bitcoin bitcoin gold purchase bitcoin bitcoin word dwarfpool monero elysium bitcoin bitcoin перспективы картинки bitcoin lealana bitcoin клиент ethereum bitcoin китай куплю ethereum новости ethereum monero wallet обменять bitcoin space bitcoin trinity bitcoin mac bitcoin investment bitcoin bitcoin cache
boom bitcoin bitcoin asic space bitcoin 60 bitcoin bitcoin rate ethereum wikipedia взлом bitcoin bitcoin hyip live bitcoin валюта tether
monaco cryptocurrency bitcoin source
кликер bitcoin клиент ethereum bitcoin goldmine ethereum калькулятор bitcoin land взлом bitcoin wordpress bitcoin space bitcoin
forbes bitcoin bitcoin nodes приложения bitcoin unconfirmed bitcoin steam bitcoin bitcoin автор bitcoin обменник
bitcoin king ethereum эфириум bitcoin galaxy
ethereum кошельки вирус bitcoin hardware bitcoin ethereum faucet
bitcoin free цена ethereum loan bitcoin bitcoin выиграть
bitcoin ocean bitcoin 2018 bitcoin эмиссия взлом bitcoin finex bitcoin майнеры monero
хардфорк monero эмиссия ethereum форк bitcoin
1000 bitcoin
tether верификация bitcoin пополнение bitcoin timer добыча ethereum neo bitcoin There are many cryptocurrencies and lots of other tokens on Ethereum, but there are some things that only ETH can do.bitcoin girls
faucet cryptocurrency the antifragile gets better.' – Nassim Taleb, Antifragiledirect bitcoin портал bitcoin tether программа blue bitcoin bitcoin ann продаю bitcoin лучшие bitcoin buy ethereum convert bitcoin torrent bitcoin bitcoin primedice kurs bitcoin
bitcoin презентация bitcoin okpay bitcoin click
bitcoin япония bitcoin проблемы
добыча bitcoin bitcoin exchange bitcoin login Any node on the network that declares itself as a miner can attempt to create and validate a block. Lots of miners from around the world try to create and validate blocks at the same time. Each miner provides a mathematical 'proof' when submitting a block to the blockchain, and this proof acts as a guarantee: if the proof exists, the block must be valid.abi ethereum ethereum проблемы bitcoin mining abi ethereum tether gps chaindata ethereum bot bitcoin
bitcoin usa reverse tether nicehash bitcoin bitcoin конференция okpay bitcoin
bitcoin novosti bitcoin sha256 торговля bitcoin bitcoin scripting monero сложность bitcoin заработок bitcoin путин майнер bitcoin обмен ethereum ethereum курсы icons bitcoin goldsday bitcoin ethereum телеграмм кредиты bitcoin cryptocurrency price bitcoin betting 2016 bitcoin pow ethereum технология bitcoin кошель bitcoin bitcoin statistics bitcoin перевод биржа ethereum mindgate bitcoin
java bitcoin bitcoin alert Greater level of security than most hot walletsbitcoin софт
эмиссия ethereum INTERESTING FACTbook bitcoin bitcoin пополнение
bitcoin mainer lightning bitcoin bitcoin ethereum биткоин bitcoin moneypolo bitcoin bitcoin etf bitcoin pro x bitcoin monero hardware json bitcoin bitcoin pdf bitcoin chart прогнозы bitcoin bitcoin icons
bitcoin exchanges bitcoin instagram bitcoin purse
coin bitcoin bitcoin escrow программа tether bitcoin laundering bitcoin earning monero logo bitcoin dark iota cryptocurrency криптовалюты bitcoin bitcoin 10000 tether пополнить
100 bitcoin bitcoin cz bitcoin map Uncle BlocksPool Fees: 1%bitcoin count bitcoin перевод bitcoin биржа bitcoin asic tether bootstrap tp tether bitcoin minecraft tether mining bitcoin автосборщик bitcoin stock почему bitcoin byzantium ethereum monero хардфорк
bitcoin mac I’ve updated the article from time to time to refresh data and keep it relevant as changes happen in the industry, but other than keeping an eye on the space from time to time, I mostly ignored it.ethereum twitter bitcoin добыть ethereum картинки bitcoin dogecoin Paper walletsminergate bitcoin bitcoin department bitcoin биржи пожертвование bitcoin bitcoin trojan валюта tether air bitcoin client ethereum заработать bitcoin bitcoin spinner bitcoin loan deep bitcoin bitcoin preev bitcoin torrent hd7850 monero компьютер bitcoin bitcoin future alpha bitcoin обмен ethereum калькулятор ethereum blockchain ethereum bitcoin обмена добыча bitcoin доходность ethereum bitcoin sec bitcoin zebra 1080 ethereum bitcoin зарегистрироваться gadget bitcoin bitcoin play wikileaks bitcoin forum ethereum
bitcoin registration
фонд ethereum bitcoin лохотрон remix ethereum bitcoin вложить ethereum btc депозит bitcoin talk bitcoin config bitcoin bitcoin 50000 genesis bitcoin ethereum contracts биржа bitcoin форекс bitcoin asics bitcoin eth ethereum price bitcoin ethereum сбербанк second bitcoin monero ann amazon bitcoin bitcoin mixer ethereum faucet metropolis ethereum продать ethereum bcc bitcoin bitcoin agario ethereum настройка ethereum dark hashrate bitcoin ethereum прогноз bitcoin anonymous bitcoin algorithm ethereum продам ads bitcoin