Bitcoin is the miracle child of a mysterious man or team that goes by the name Satoshi Nakamoto. In an effort to realize a dream of a decentralized monetary network, bitcoin was created to lessen the gap between the grip of centralized networks that dominate the financial world and decentralized ones, driven purely at first by philosophical momentum. The fluctuation of bitcoin's value is making it a volatile currency with a wide market of investment. In 2010, a man bought two pizzas for 10,000 bitcoins, back then it only totaled to about $30, nowadays 10,000 bitcoins amount to almost 95 million dollars. This kind of currency attracts 3 different kinds of people, those who truly believe in a decentralized system, blockchain technology developers, and investors in it for the money. Bitcoin's becoming more integrated into financial transactions and some countries are now regulating its trade. This guide shall be a quick introduction to help you get started on trading with bitcoin.
Normal Forex Trade VS Bitcoin Trade
A normal forex trade basically means betting that a currency will either go up or down in value. If you deposit $1,000 into your forex account, assume the GBP/USD ratio to be 0.5, which means that 2 dollars equal 1 pound. If the ratio changes to 0.40, your 1,000 dollars now are worth $1250, which is a profit margin of 25%.
Using bitcoin to trade may get a bit tricky. Following the previous example, and assuming the bitcoin to equal $500, 2 bitcoins are equal in value to $1000, which means 500 pounds. You'll make the same initial profit yet there is another factor that will affect your final profit, that is, the volatility of bitcoin. If the bitcoin value increases, your dollars are now less in value which will net you a loss instead of profit.
Bitcoin is considered a new revolutionary currency; it paved the way for the development of different cryptocurrencies and raised the awareness of the public about decentralization and blockchain. The decentralized state of bitcoin makes it more trusted than other currencies since no bank can control its valuation, there's no inflation or imposed interest rate on bitcoin.
High Leverage and Price Movements
Forex brokers that allow bitcoin offer very high leverage rates than can reach up to 1:1000. This makes it attractive yet only experienced dealers should approach such high leverage due to the high risk involved. Bitcoin traded around the clock as DiamondFX believes that experienced traders can take advantage of the constant price movements at any time of the year. You'll want to keep an eye on any major events as it can drastically affect the bitcoin's value in no time.
Fees and Security
Bitcoin traders shouldn't expect to pay transaction fees since there is none imposed on bitcoin because it's all digitally recorded on a public blockchain. The most lucrative feature of bitcoin trading is the security a cryptocurrency provides; there is no need to provide banking information even when you're dealing with foreign brokerages.
Instant Conversion and Unregulated Activity
Like any investment worthwhile, bitcoin trading comes with its share of risks. Using bitcoin in forex trading adds another not fully predictable element; you'll want to know the exact bitcoin exchange rate your broker sets. Most brokers sell the bitcoin once a client deposits them into your account, and this makes your deposits vulnerable from the conversion of bitcoin to USD decline rate. The high volatility of bitcoin means a lot of unregulated activities by brokers; sometimes brokers switch exchange rates to swipe the difference between the rates.
Forex trading isn't exactly for everyone, adding bitcoin into the mix sure makes it more complex. Before you begin trading, you need to get yourself familiar with how forex works, and then get yourself up to speed on how bitcoin can be integrated into trading. A volatile section of the market like this one demands to stay sharp and ready for any sudden movement.