All You Wanted to Know About Bitcoin Forex Trading But Were Afraid to Ask

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bitcoin-forex-tradingAre you an experienced trader or an investor who is looking for new opportunities or interesting ways to invest your money? There is a potentially very profitable option and we’re going to discuss it here. Does this sound appealing? If so, carry on reading.

What is Bitcoin? In Short

Some of you probably know what Bitcoin is, but it is unlikely that you understand how it works. However, we are talking about an issue, which is directly connected or relative to your money so it’s better to understand what it really is. We will try to explain it a little bit.

First of all and the most obvious thing, Bitcoin is a cryptocurrency, which does not have any central bank or institution so in other words it’s fully decentralized. Satoshi Nakamoto invented Bitcoin in 2008 and since that time Bitcoin has been growing each year. Though its growth hasn’t always been at the same rate, there have been slumps and fallings but it still continues to grow and tends to be less volatile.

Thousands of people around the world are mining Bitcoins; in particular, mining pools. Businessmen invest their money into data centers and mining rigs to mine Bitcoins and therefore the whole system is maintained by the Bitcoin society. There are only 21 million Bitcoins and consequently Bitcoin isn’t susceptible to inflation like other real currencies.

Not very complicated, right? If there is a need to get more information about Bitcoins you can read other articles on our website.

Good Examples

Are you considering investing in Bitcoin and especially trading with Bitcoin? Let’s delve a little deeper into this way of trading. A Forex scheme is quite simple to understand. There is a particular pair of currencies, let say, US dollar and the Great Britain pound, which is GBP/USD normally. If you have a deposit of $100 and the ratio is 1/1.51 you can buy £66. Then the price of GBP rises up to 1/1.57, you sell your pounds and receive a profit of 3%. Investing in Bitcoin is similar but there are three steps, not two. Here they are.

When we’re talking about trading in Bitcoins, you need to keep in mind three currencies, not two. As an example, you transfer your 5 Bitcoins to an online wallet of a Forex broker who accepts Bitcoins. The price of a Bitcoin is $350 at this time; therefore the amount of money in US dollars equals $1,750. Then you buy British pounds for $1.51 per one pound which equals to £1,158. After a period, the price of GBP goes up and you sell them for $1.59 per pound, which equals $1,841. Here your profit is around $91 but you still should keep in mind that there is a third step. Do you remember that your transactions started with Bitcoins? Hence, you need to calculate your profit or loss in Bitcoins after all. Again, your Bitcoins cost $350 each but since that time, the price can change. If by the end of your transactions, BTC costs $330 per each Bitcoin, your total deposit in Bitcoins will be 5.58 Bitcoins compared with your starting deposit of 5 BTC. Not a bad return. It seems interesting but there is a high potential risk. Let’s discuss what it is in more detail.

Related: Why You Should Keep an Eye On Bitcoin’s Volume

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Make Your Decision

What are the potential risks of trading with Bitcoins? As mentioned earlier, we need to keep in mind three currencies instead of two. It causes some difficulties when you’re trying to choose the correct moment to buy or sell. For instance, if the price of Bitcoin doesn’t fall but rises, say up to $370, your $1,841 will be equal to 4.97 Bitcoins. The problem is there are three prices which can vary and change which can have a significant affect on your income. The risk is higher but the potential profit is also much higher if you are aware of what you’re doing. However, for these reasons, it’s still very attractive to traders.

Trading with Bitcoins has almost no cost or fees. The deposits in Bitcoin can be very low, starting at $100, $50, or just $25, which is very unusual for Forex. Transactions with Bitcoins are very secure and safe and you don’t have to use your bank account information or details of your credit cards.  This mean you run the risk only with the amount of what you use in these transactions and not with the money in your pocket. Last but not the least, Bitcoin has no national or country borders so you may use it wherever you want. It means you have an extremely wide range of choice. An investor is able to find a better broker even if this broker is located in New York while the trader lives in Hong Kong. It makes your trading truly global and international.

Now, we have cleared up the issue, explained the advantages and disadvantages, it is now up to you.

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