If you’re a forex trader, the chances are that you have heard of Bitcoin.
So, what is bitcoin? Why should a forex trader care about it? How does it relate to forex trading? In short – What is Forex Crypto Trading?
This article will try to answer those questions as simply as possible so that even someone who has never traded the financial markets before can understand. We’ll use layperson’s terms wherever possible!
We first need to explain what bitcoin is – no mean feat considering its value comes from being a currency with no assets backing it.
Bitcoin is a digital currency
It’s a basic code, and you can buy it, sell it and trade with it just like any other currency. Instead of having a central bank backing it or being tied to the value of gold or silver, it comes from the fact that people agree that it’s valuable.
If enough people believe in something as a store of value, then there is no limit to how high an item’s price scale can go!
A great example would be gold. Gold doesn’t have any real-world uses apart from jewelry these days, but by agreeing to accept payment in gold, we’ve given it value all around the world for thousands of years.
How Bitcoin works within a forex trading context
Bitcoin is divided into smaller parts, like pence in the pound or pennies in the dollar.
Bitcoins are bought and sold like shares in an open market and depending on how many people want to sell them and how many people want to buy them, their price will fluctuate every minute of every day!
The value of one bitcoin can go from $50 k to $60 in a few weeks and back down to $45k in another few weeks; such changes to the market itself should show how volatile this market is!
Bitcoin online accounts
There are several online exchanges that you can use to buy or sell bitcoins. You simply need to create an account with one of these websites to deposit money into it (to buy bitcoin) or withdraw money from it (to sell bitcoin).
Once your account has been activated, you’re free to deposit whatever amount of cash you want into your account using either the bank transfer service provided by your bank or through other methods, such as PayPal.
One thing we should mention here, though – don’t try to wire funds directly from your bank account because there have been cases of people having their accounts frozen after they have flagged wire transfers as potential money laundering! Once you’ve deposited cash into your account, simply head over to the market where you would like to buy or sell BTC (bitcoin) and make the transaction.
It’s important to note the current price of bitcoin in whatever currency you are trading because if you don’t make an order at the exact right moment, then your trade could end up costing more than it should have done. If you’re buying bitcoins, then be sure that they will show up in your wallet within a few minutes – unless something has gone wrong with either your bank transfer or with the exchange itself.
Some final pointers
When buying bitcoins, try to avoid using instant payment methods because there have been cases where people have used these services to buy bitcoins with the coins not turning up in their account. Once you’ve bought your bitcoins, withdraw them from the exchange and send them to your wallet (the BTC address you created earlier) so that they can be stored safely until you want to trade with them.
If you’re a new trader it’s always best to start out using a demo account offered by trusted brokers. It allows you to learn how to analyse the markets before making a real-money investment.