For those of you who have been thinking about trading Bitcoin Forex Trading, here are five risks that you should consider before getting started. You may be able to mitigate these risks and, even if you can’t, at least you’ll be aware of them before risking your money in this volatile market.
Plus, once you learn the basics of this exciting market and xtb trading, you can become one of the increasing numbers of people making money in Bitcoin Forex Trading.
1) As more people adopt bitcoin for forex trading, the exchange rate increases
A rising exchange rate for bitcoin forex trading creates two potential problems for those who haven’t yet adopted it as a currency. First, as an investment in and of itself, buying and selling bitcoin becomes riskier because its price rises and falls with increased volatility.
Second, if you’re planning on accepting bitcoin as payment. Whether that’s an online business or a brick-and-mortar shop. Your clients may pay less due to its increasing value.
2) Crypto arbitrage may not always be effective
Arbitrage can be tricky since you’re relying on the volatility of a certain asset. If you’re trading on an exchange that doesn’t have enough volume and liquidity, it might not be possible for your trade to go through due to price slippage. This could happen if there isn’t enough available volume between BTC-E and Mt.
3) Spreads on cryptocurrency exchanges are higher than on traditional exchanges
When you trade cryptocurrency, you’re buying and selling on an exchange. Traditional stock exchanges (like Nasdaq or NYSE) have their prices for stocks. You can see what they are by visiting Yahoo Finance. Cryptocurrency exchanges do not. They instead use price as a spread (or pips) as part of their trading model.
4) Leverage on crypto exchanges is similar to margin trading
you can trade with more money than you have in your account. This means that if you place a $10,000 limit order on bitcoin at 20% leverage, then an exchange like Poloniex will allow you to trade $20,000 worth of bitcoin even though your balance is only $10,000.
However, not all crypto exchanges operate like Poloniex. For example, Bitmex allows leverages up to 100X. Something which helps explain why many traders will use these exchanges.
5) There may be disruptions in service as regulation is still evolving
Due to its unregulated nature, Bitcoin is a highly volatile and potentially risky asset. Cryptocurrency platforms that trade digital assets are new and unproven. There have been several operational risks with exchanges for digital assets that were recently hacked or where hackers stole all their clients’ assets.
In 2014, Mt Gox, which was once one of the largest Bitcoin exchanges in the world, filed for bankruptcy after it was hacked. More than $460 million worth of Bitcoins were stolen.
Conclusion
Bitcoin has opened up an exciting new world of financial freedom, but it’s also come with its own unique set of risks that many don’t consider before jumping in head first. There are quite a few Bitcoin risks you should take into account before trading Forex using Bitcoin, but fortunately, there are some steps you can take to minimize these risks while enjoying all the benefits of cryptocurrency trading.