The trading of Bitcoin has experienced a massive resurgence in the last two years, following a lull when prices crashed as a result of the collapse of a major exchanger known as Mt Gox. However, several factors have created the perfect atmosphere for the Bitcoin resurgence. This cryptocurrency is gaining widespread acceptance across the world, especially in places where the level of penetration was low prior to the Mt.Gox collapse. Furthermore, many more merchants are adding Bitcoin as one of their means of payment settlements, and forex brokers have not been left out as a few of them now offer Bitcoin as one of the assets available for trading on a daily basis.
Bitcoin (BTC) is offered for trading on the platforms of eToro, FBS Markets, Instaforex, AvaTrade and Plus500 as the BTC/USD pairing (visit >> Best Bitcoin Forex Brokers List). The trading of Bitcoin on forex platforms no doubt has introduced a new way to own and sell Bitcoin without having to go through the Bitcoin exchanges. Most people who trade Bitcoin on the exchanges do so on a speculative basis; buying Bitcoin at a lower price while aiming to sell it off at a higher price. With forex brokers, you can make money from rising or falling prices of Bitcoin. It all depends on what side of the trade you are on relative to the desired price movement.
What makes Bitcoin very desirable for trading on a forex platform is the volatility of the asset. BTC is one of the most volatile assets on the market today. In financial trading, volatility is what produces market opportunity to benefit from the differential in prices.
What are the Advantages of Trading Bitcoin with Forex Brokers?
There are some unique advantages that you can get by trading Bitcoin with forex brokers as opposed to Bitcoin exchanges.
- The process of trading Bitcoins with forex brokers is a lot simpler. When trading Bitcoins with exchanges, the trader would need to have access to a Bitcoin digital wallet as well as a Bitcoin client. Downloading a Bitcoin client requires a large amount of disk space. But when trading Bitcoin with a forex broker, all you need is a brokerage account and access to the broker’s platform. Such platforms can even be web-based, so there is no need to download anything and precious computer resource can be saved.
- Trading Bitcoin with a forex broker allows you to trade with leverage. That means that you do not need to pay the full amount for the contract in order to hold the full contract size. You only need to come up with a portion of the required margin, and you still get to enjoy the full profits if the trade is profitable. However, you must also know that leverage can work against you, so leverage must be used responsibly. If Bitcoin is traded on an exchange, the trader is required to pay the full cost of the contract. The use of leverage on a forex platform therefore reduces the cost of trading Bitcoin.
- Traders who trade Bitcoin on a forex platform have access to the full suite of technical analysis tools that any forex trader would have. Therefore, it is possible to conduct technical analysis on Bitcoin and know where to enter or exit trades. Those trading on Bitcoin exchanges do not have access to this facility.
How to Start Trading Bitcoin on a Forex Platform
Step 1: Account Opening
The first step to your Bitcoin trading career with a forex broker would be to open an account with a forex broker that offers the Bitcoin/USD pairing for trading. For our example, we would use eToro, a broker which offers Bitcoin for trading as a Contract-for-Difference (CFD) instrument. eToro offers the BTC/USD pair on its OpenBook platform. Fulfill all the Know-Your-Customer (KYC) requirements by providing your government-issued IDs and proof-of-address documents.
Step 2: Account Funding
The next step is to fund the trading account in any of the account currencies listed. The most popular currency to use is the US Dollar. Fund your eToro account with US Dollars by using any of the payment transaction methods such as credit/debit cards, bank wires, e-wallet options such as Skrill or any other acceptable payment method listed on eToro for your country.
Step 3: The Trading Process
Go to the Bitcoin page on the OpenBook platform of eToro. You will see the interface showing the price of Bitcoin as well as the candlestick chart. There is also a “Trade” button on the top right corner of the screen. Click the Trade button.
Clicking the Trade button takes you to the next page where you are required to select the amount of Bitcoin (Bitcoin Stock) you want to buy. You can choose the default amounts or you can enter a custom amount in the space provided at the bottom of the page.
Confirm your trade entry and it will be placed in queue. Usually the Bitcoin orders are executed at specific times of the day on the eToro platform.
Points to Note
It must be noted that other forex brokers may have trade conditions which are slightly different. For instance, AvaTrade offers two Bitcoin contracts: a mini contract (Bitcoin Mini) which does not expire, as well as a weekly contract (Bitcoin Weekly) which expires at the end of the trading week. Also, some brokers allow execution of orders as soon as they are made, which differs from the eToro model where orders are fulfilled just 4 times in a trading day.
Forex brokers generally do not allow Bitcoin trading on weekends, even though Bitcoin is traded 7 days a week on the traditional exchanges.
It should also be emphasized that forex brokers offer Bitcoin trading as a form of CFD trading, which means that no Bitcoins are actually owned. Traders only make money from price fluctuations on the asset without actually owning the asset. It is important that those who wish to trade Bitcoins on forex platforms take note of these differences.