Millions of people trade forex in the world. Bitcoin, a virtually new currency, has been introduced to the market and has been circulating around the internet. It is used to make online purchases as well as exchange for tangible money. This decentralized digital currency enables payments at low costs without need for issuers and central authorities. You can access Bitcoins from all over the world as long as there is internet connection.
There are strong beliefs about the fate of major currencies in the world, most of which are based on historical trends. This could be the reason as to why many people prefer including currency trading in their general trading portfolio. Introduction of digital currency as a substitute trading currency offers unique opportunities as well as challenges to those taking part in forex. Here is a look at the basics of the new type of currency. The information gives a better understanding on the potential of the Bitcoin especially if you are interested in the currency.
The Development of Bitcoin
Bitcoin has just gained public attention recently but it was developed back in 2008. The developer, or a group of individuals, used the name Satoshi Nakamoto. An explanation was put across on how to get Bitcoins through solving puzzles and searching for a combination of 64-digits for the Bitcoin network. You get 25 Bitcoins once your computer generates the combination.
The value of the new currency has greatly changed since its inception. Initially, one US dollar was exchanged for 1,309.03 Bitcoins and currently one Bitcoin is valued at $250 US dollars. Generally, the value of Bitcoin fluctuates against other currencies with the conversion between currencies being performed at particular online exchange services. Transactions dealing with the currency are fast as there are no central authorities.
Traditional Currencies Are Not Good Enough
Genuinely, traditional currencies are easy to understand as they are intensely connected to macroeconomic influences. But as an average retail forex trader you are at a disadvantage as you are competing with large institutions that have better systems and more information. Actually, the larger part of forex market is made up of institutional forex traders, primarily large banks. They usually have information which may not be readily available to the entire market or are able to trade faster than others.
The Relevance to Forex Traders
Some brokers are offering Bitcoin-denominated accounts as one of their services. For instance, a Slovenian broker known as Bit4x allows the clients to withdraw and fund their accounts using the digital currency. Getting such an account is a good thing although trading in the currency may take sometime to get fully established.
Bitcoin has got much attention as there is always a risk of the euro and other major currencies declining. A wise investment in Bitcoins could serve you well in terms of hedging your risks. With the increased popularity in use of the digital currency, you should not be surprised to see brokers pairing BTC with other currencies like the US dollar.
It Is Time to Get the New Currency
It is difficult for an average forex trader to realize outstanding returns due to lack of an edge on the market. Well, the normal forex market is already efficient unlike the Bitcoin. But still, Bitcoin has a great chance basing the argument on the inefficient pricing of other currencies while paired with Bitcoin. It beats other currencies in forex trading due to a number of reasons:
1. Its Price Is Only Dependent On Demand
A trading theory may be realistic as it is based on macroeconomics of a currency’s principal economy, money supply by the central bank and the changes in interest rates. Technically, these forces have huge and unpredictable influence on the price of a currency which is difficult to moderate. To be on the safe side, you need Bitcoin as it is not subject to such measures. The digital currency is being created at an anticipated rate up to an eventually limited quantity, leaving the price to be controlled by the demand forces. This makes Bitcoin to behave like a commodity in numerous ways and paves way for success with new trading strategies.
2. Marketing Basically Consist Of Retail Traders
Unlike forex currency where institutional traders control the market, retail traders are the main drivers of Bitcoin price giving room for an average trader to design a distinct strategy in the market.
3. Trading Bitcoin Feels Similar To Trading Traditional Forex
Traders can control their returns through platforms which offer margin trading. This is identical to what happens with the traditional forex accounts.
Challenges the Currency Faces
Just like other forex currencies, Bitcoin is faced by a number of obstacles as a new forex prospect.
1. It is decentralized hence not supported by any central bank. It is a major issue when it comes to application of regulatory rules on Bitcoin forex trading or ultimately the trade pertaining BTC pairs. Many Bitcoin platforms have been victims of hacks and end up losing large amounts of the customer money.
2. It is hard for clients to deal with trading errors and malpractices carried out by brokers. Tracking the exchange and checking whether a broker is dealing with real Bitcoins can be very tough.
3. There is great fear that certain regulators may impose a general ban on the currency due to similarity to money laundering. There are people who use Bitcoins to conceal money that they do not want traced back to them.
4. News greatly impacts on their price. The largest price swings that Bitcoin has experienced are as a result of positive or negative news aired about the currency. Articles on issues like buying drugs online and bypassing MoneyGram services by using Bitcoin trigger major swings.
Bitcoin is going to become a unique and captivating trading currency in the foreseeable future. It is quite simple to deal with. Once you get your Bitcoins, you can store them in a digital wallet. You are also free to send them to anyone with a Bitcoin address. Certain opportunities are set to diminish over time since more traders are entering the market hence you ought to take advantage of this opportunity right away. Hesitations are not worth it as the volatility the currency has will eventually come down as its economy becomes more established.
Latest posts by admin (see all)
- 5 Steps to Creating a Trading Plan that’s Guaranteed to Bring Profit - January 8, 2015
- Why Decision Spots Define the Forex Market - August 9, 2014
- Analysis of the Yen: Opportunity for Trend Traders? - August 8, 2014
Winner’s Edge Trading, as seen on: