Estimated reading time: 4 minutes
It’s pretty amazing how the popularity of bitcoin grows day by day. Due to it’s high demand, many Forex brokers are beginning to accept bitcoins both as a form of trading and also, deposits and withdrawals!
Bitcoin is a new kind of money, an online digital currency with no specific owner. Read more about Bitcoins.
Forex trading on the other hand, deals with trading of currencies. This type of trading was initially meant for big companies, organizations to assist them in making global currency exchanges and transactions. However, today, many individuals are beginning to take part in the “forex game”. This is mostly because they have the impression that trading currencies online could be a gold mine to making big wealth.
The Forex market is the largest and most liquid market in the world controlling more than $3 trillion in exchanges per day!
Currencies must be paired together in the foreign exchange market for trading transactions to take place. This means that one currency is exchanged for another. An example of this is the popular EUR/USD pair. In this example, the EUR is the “base currency” while the USD is the “quote currency”. When traded together in this instance, USD , the quote is used to purchase the base, EUR. The price at which this is done is called the exchange rate for that particular pair.
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The exchange rate for any pair fluctuates within fairly known limits and this is why professional traders can easily bet on whether a particular currency price will rise or fall for a specific period of time.
Typically, investors make money in the forex market when there are fluctuations in any of the currencies being traded. This explains the reason why bitcoins is beginning to take in the traditional foreign exchange trading.
Once there’s supply and demand for any currency of an economy, there’s a likelihood that the value of the currency will continue to move up and down as many are investing in that economy.
This is why bitcoin forex trading is becoming popular among traders. Currently, people all over the world including individuals, Governments, Organizations, Countries, Security agencies e.t.c are interested in that single topic “Bitcoin”. The interest may culminate in the interested parties either buying/selling bitcoins, exchanging bitcoins, shopping with bitcoins and so on. So, there’s a high supply and demand for bitcoins.
Most Forex trading is conducted through dedicated Bitcoin exchanges, such as MtGox, which allow you to “buy” Bitcoins. Forex trading differs from a traditional Bitcoin exchange in that it is non-executable and you buy Bitcoins in pairs. This means that you can’t simply withdraw your Bitcoins and use them to make purchases. Instead, you invest in a dedicated financial instrument, in this case a currency pair.
Recently, forex brokers are beginning to offer bitcoin as an investment vehicle owing to it’s popularity. Apart from helping to boost their businesses, it allows the traders to make money off of the world’s first decentralized digital currency.
Not many brokers are offering bitcoin forex trading today but the few that are involved with it have a similar way of operation.
Basically, brokers allow you to trade bitcoins (BTC) in relation with any other currency in their platform. This means that they also offer bitcoin in pairs with others. However, not many BTC pairs are in use today. The only one currently accepted by the major brokers is BTC/USD. This is not static and may change in the future as the bitcoin customer base grows even larger.
As a last note, one important thing to note when trading BTC CFDs is the rate at which the value of bitcoins fluctuates. Because of this high volatility, it is recommended that only professional traders should engage with bitcoin forex trading to avoid risk of losing your entire capital.
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