Crypto Forex Trading

Crypto Forex Trading Using BTC: Merits And Demerits To Know!

Most of us like investing to earn profits, isn’t it? For this purpose, a lot of ways and domains have been found. Some of the most prominent ones are stock, forex, and crypto trading. While forex and stock markets have been existing for a long time now, the cryptocurrency domain is fairly new and not much is known about compared to the others. Also, the forex market is the largest financial market in the world and also the most liquid one making it suitable for many investors. On the other hand, the crypto space is unregulated and dynamic. Even in such a situation a thing like crypto forex trading exists!

Crypto Forex Trading With Bitcoin (BTC)

Crypto forex trading indeed exists, and the concept is a little difficult to understand but with a few reads, you will be able to grasp it. We would be talking about crypto forex trading that particularly concerns Bitcoin (BTC), the largest cryptocurrency in the world. Well, for making a crypto forex trade it is essential that one registers with a forex trading portal that accepts Bitcoin. Some crypto forex trading platform options that can be used for this purpose are eToro, AvaTrade, and LiteForex which allow crypto and forex trading.

For instance, assume that BTC is valued at USD 100 (hypothetical numbers have been used for better understanding). Then you deposit two bitcoins, which would amount to USD 200 to acquire a stake in British pounds [GBP (£)] If the exchange rate is £0.5 = USD 1, then you would get £100 in your account. Then you need to wait for the value of USD to rise against GBP to make profits. Let’s say, the exchange rate after some days is £0.42 = 1, then you will be entitled to a profit of £38.09 if you square off the position at that very moment.

Therefore, we can conclude one thing that a crypto forex trade is somewhat similar to regular forex trading but the use of crypto makes it a lot different. This is due to the fact that the price of cryptocurrencies changes even within a second. Therefore, during the time in which you think and execute an order, the stake you might acquire would change due to the fluctuating BTC prices (the example considered here). Along similar lines, there are some advantages and disadvantages of the concept of crypto forex trading, which have been discussed later. But before that let’s consider forex trading vs crypto trading.

Forex Trading Vs Crypto Trading

Here is a table that briefly discusses the comparison of forex trading vs crypto trading.

Forex Trading

Crypto Trading

Stable In Nature

Very Volatile

Completely Regulated 

Not Regulated Enough

Impacted By Global Boundaries

Is Not Affected By Global Boundaries


Merits Of A Crypto Forex Trade Using BTC

The advantages of crypto forex trading have been noted below.

1. Decentralized Stake

One of the significant pros of doing a forex trade using BTC is that Bitcoin is not tied to any central bank. This means that one can acquire a decentralized stake in the forex market, which would not be possible generally as currencies are mostly regulated by the apex bank of a country. This makes the trade free from the macroeconomic pressures or inflation rates prevailing in any country, which is indeed luring when crypto and forex trading is considered.

2. The Required Deposit Amount Is Less

There is always a minimum deposit amount that people need to fulfil while making any trade whether it be crypto or forex. In the case of crypto forex trading, people can start undertaking the operations after investing as little as $25 with the help of some bitcoin forex trading platforms. Some of these platforms have been known to have provided promotions that include things like a matching deposit amount. However, people should research about them to know if they are legit and regulated properly.

3. Higher Leverage

There are a host of brokers that offer one the opportunity of gaining higher leverage when Bitcoin trading is considered in the forex domain. The ones who are experienced would be able to use this as a way to earn further profits. But yes, one thing should be noted here that such high amounts of margin trading should only be considered under caution as they might be responsible for higher losses if gone wrong.

4. Trading Cost Is Shrinked

Since the concept of crypto forex trading is fairly new, platforms availing such services have been under the pressure to lure customers. For this purpose, the cost of trading has been mitigated massively. In order to attract customers, many such portals allow people to make a crypto forex trade at a low cost instead of charging exorbitant amounts. Lower trading fees also mean that the amount of profits would be higher than usual and this is why it is beneficial.

5. Devoid Of Global Boundaries

Bitcoin is not bound to any global boundaries; therefore, traders might get an opportunity to venture out into better trading prospects. People can sit in the U.K. and can interact with brokers in the U.S. for making a crypto forex trade. However, the crypto regulation framework in every country is different which might pose a problem while crypto forex trading. But in case both parties in the transaction are willing to do it, there are no international boundaries that can stop them.

Demerits Of A Crypto Forex Trade Using BTC

The disadvantages of making a crypto forex trade have been stated here.

1. Various Exchange Rates

Bitcoin is available to be traded on various exchanges. Therefore, a variety of rates can be found when someone hops from one exchange to the other. In this case, the entire process of calculation would differ at the end of the trader. Therefore, it is extremely important for the trader to contact their broker or research thoroughly about the exchange rate that they would be following. Also, make sure to use a regulated crypto forex trading platform.

2. Risk Of Volatility

As stated earlier, digital currencies in general are very volatile. This is why when somebody is making a crypto forex trade using Bitcoin, they can face a number of challenges. Since the domain is fairly unregulated, people can use it for their benefit. For instance, someone deposits 2 BTC (each valued at $500) with an unregulated broker and during the day the price fluctuates between $495 to $540. The unregulated broker would always consider the lowest price, which is $495 and would also deduct the commission fee, thus resulting in losses for the trader.

3. Danger Through Rate Of U.S. Dollar

Whenever a broker receives a BTC deposit from their clients, the first thing they do generally is sell it for USD and hold the amount for later. Now, even if the concerned trader does not acquire a forex position then and there, still they are at a risk of losses due to the fluctuating Bitcoin-USD rates that would change within the time of deposit and withdrawal. This is due to the fact that not only does the value of BTC change during the day, the value of USD also changes considerably.

4. Security Issues Related To Bitcoin

Bitcoin has been known to have security issues and is prone to theft and hacking, which can be detrimental for the one using it for crypto forex trading. It is also a result of the sector not being regulated properly. In this case, all one can do is use trusted wallets and sites to store and trade their acquired BTC in order to avoid theft and loss of possessions. Therefore, only the best and most trustworthy crypto forex trading platform should be used.

5. Leverage Hazards

Well, high leverage might be an advantage for experienced traders, however, in the case of a newbie, they might end up losing all their funds. This is due to the fact they might undertake crypto forex trading activities without proper analysis and care, thus, making risky moves. Thereafter, they might incur higher losses as high leverage in the forex market is prone to that. However, this demerit applies to all forex transactions and not just when crypto and forex trading are considered together.

An Uncanny Closure!

Crypto forex trading might lure you as the volatile conditions of the cryptocurrency market and the stable nature of forex might be an attractive opportunity for an investment. However, all that glitters is not gold. We do agree that there are several benefits of making a crypto forex trade but there are some limitations as well that need to be considered. Therefore, for making such a trade you need to be well-versed in both domains. Also, if you are a newcomer, never start trading all by yourself without expert advice to stay safe.

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