The forex market is dynamic and cryptocurrencies are adding an interesting new dimension to currency trading. There are some FX brokers accepting bitcoins, but must you start using your BTCs in the Forex markets. You can easily Trade BitCoin Online via the ADSS brokerage platform, but first, understand the benefits and risks associated with FX trading with bitcoins.
Benefits of FX trade with BTC
Bitcoin is a digital currency without any ties with the central bank. Digital currencies are isolated from the influence of political instability, inflation, employment problems, or interest rate fluctuation.
Forex brokers offer high leverage on trading X with bitcoins. Seasoned traders can take advantage of this high margin. However, they need to approach carefully because along with huge leverage the potential for losses also magnifies.
The trader can start trading with as low as $25 on BTC trading platforms. Several brokers offer matching deposit amounts to their new customers as a welcome gift. However, ensure that the broker is regulated and reliable.
Low trading cost
FX brokers that accept BTC or other cryptocurrencies keep their brokerage costs low to encourage new customers to open a Bitcoin Demo Account and start practicing with virtual money.
The bitcoin transaction is anonymous as there is no need to share credit card or bank details. It is a major advantage concerning financial security and cost.
No global boundaries
BTC transactions are not constrained within geographical boundaries. A South African trader can trade FX via a broker based in the US. There is an issue of regulatory challenges, but if the broker and the trader are willing there are no global boundaries that can stop them.
Risks of FX trading with BTC
Different exchange rates
BTC is traded on several exchanges, so there is a difference in their exchange rates. So, the trader must find out which BTC exchange rates the FX broker is using before they sign up.
Risk of the US dollar rates
When the brokers receive BTC deposits from customers, the BTC gets sold and the amount in the US dollars is held in the account. Even if the trader does not instantly take the FX trade position after deposit, he/she is exposed to the US dollar to BTC rate risk right from the moment they deposit bitcoin to withdrawal.
Bitcoin rates have shown high volatility in the past. Due to a lack of regulations, unregulated brokers use volatility to their advantage. The trader gets placed in a disadvantageous position.
For example, the intraday BTC rate changes from $4500 to $4800 US dollars per BTC. For a deposit of 2 BTC, the unregulated brokerage can apply the lowest rates and credit the trader with $10,000 [2 BTC* $4000= $8000]. During withdrawal, the broker will use the lowest exchange rate. Instead of the 2 BTC deposit trader receives fewer BTCs. The unregulated broker pockets the difference between dollars and bitcoins at the expense of their customers.
Inherent security risks
The BTC deposited in the broker’s digital wallet is prone to hacking. Therefore, sign up with a brokerage platform with insurance against theft.
Leverage is a threat, especially to new traders. They are unaware of the exposure. It is a risk to any kind of trading.