How to Trade Bitcoin With a Forex Broker
Find out how to start trading this increasingly popular cryptocurrency.
The recent meteoric rise of Bitcoin with the BTC/USD market reaching close to $3,000 has grabbed the attention of even the most bullish of traders. Although this increasingly popular cryptocurrency recently took a dive that reverberated across the cryptocurrency space resulting in the market cap taking a huge plunge from $49 billion to $36 billion in just three days, there is no doubt that trading Bitcoin continues to generate considerable interest and explains why many forex brokers have jumped on the bandwagon and started offering their clients bitcoin trading.
What is Bitcoin?
Bitcoin is a digital currency, created and held electronically that can be used to buy things electronically. It is not unlike regular dollars or euros which are also traded digitally, however, there is a major difference - it is decentralised. This means that because no single institution controls the bitcoin network, larger institutions such as banks cannot exert their control over people’s money.
Bitcoin was created by Satoshi Nakamoto, a software developer who set out to create a currency that is transferable electronically in an instant with low transaction fees and independent of any central authority.
Besides not being controlled by one central authority, it is simple to set up and with the added benefit of being anonymous since Bitcoin addresses are not linked to names, addresses and other personal information.
In addition, it is completely transparent, storing details of every individual transaction in the network in a “general ledger” known as the blockchain. Finally, transactions are fast and fees are minimal, allowing you to send money anywhere which will arrive minutes later, after the payment is processed by the bitcoin network. With all its advantages, it’s hardly surprising that this interesting cryptocurrency has caught the attention of traders.
How Can I Trade Bitcoin?
As the latest turn of events show, the price of the bitcoin is constantly fluctuating and due to its volatile nature, thorough technical analysis is a necessity to learn when it is best to buy and sell. There are currently several online currency exchanges in existence where dollars, euros and other currencies can be exchanged for bitcoins but they are usually traded through bitcoin brokers or Forex brokers who offer bitcoin trading as one of their trading instruments.
It is possible to make money trading Bitcoin and this is mainly achieved by trading it against the US dollar. In this respect, Bitcoin has already been adopted by Forex brokers, with some offering it as a counterpart in a currency pair i.e. BTC/USD which is traded in the Forex market, while others offer it as a deposit and withdrawal option for their clients.
So far, the tendency has been that brokers who accept Bitcoin as payment do not offer BTC/USD as a trading instrument, while those who provide cryptocurrency trading instruments normally do not accept Bitcoin deposits. This may however change as Bitcoin becomes more established.
Why Use A Forex Broker?
There are several reasons to choose a Forex broker which offers Bitcoin. For those who already use Bitcoin for other purposes, opening an account with a Forex broker offering Bitcoin provides an alternative payment method and makes depositing and withdrawing funds easier.
Secondly, it is a good option if you prefer to use a decentralized cryptocurrency that is not dependent on many volatile factors affecting fiat currencies and centralised payment systems. BTC/USD is an ideal new trading instrument with its own technical and fundamental factors and offers excellent opportunities to currency traders.
For sceptics who believe that Bitcoin does not have a future, shorting Bitcoin against the USD, for example, is a way of monetising those predictions but with the recent heights achieved, anything is possible. For this reason, it is important to remember that trading bitcoin is highly speculative and comes with risks. However, with thorough research, potentially lucrative opportunities await those who are prepared to put in the time and effort to get a solid grasp on the mechanics and factors affecting this popular cryptocurrency.
If you are looking for a forex broker with which to trade bitcoin, you should ensure that you have chosen a reputable one to trade with. It is advisable to compare the spreads of various brokers to ensure you are getting the price you want. You may also want to consider the leverage available for bitcoin trading so that you can increase your risk/reward ratio and your reward potential. Finally, it is recommended that you choose a regulated broker so that your money is secure at all times.