There is a new trend emerging in the world of Forex trading. Bitcoins are being used with increasing popularity by a number of Forex traders. No longer content with credit and debit cards, bank transfers and other more traditional methods of payment, traders are now choosing to use a new electronic cryptocurrency. Making payments in this way offers a decentralised way to store, transfer and acquire currency, and the Bitcoin is currently the most popular of its type.
What is Bitcoin?
Bitcoin is a cryptocurrency that was introduced to the world in 2011. From the very beginning, it achieved an unprecedented level of popularity and sparked a volatility that took its value to more than $1,200 in the first 3 years. There are a number of shrewd investors who have made millions in profits, but there are also a number who have lost everything. Bitcoin is currently being traded at a reasonable level, and cryptocurrencies are experiencing more liquidity, thereby reducing their volatility and unexpected fluctuations in price. This makes it a more attractive way of covering the cost of Forex trading.
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It has been rumoured that Bitcoin was founded by a person called Satoshi Nakamoto, but little is known about them, or whether they are a single person or group of programmers. It is a decentralised currency, in that no government, country or financial institution has any control over it. It is also one of the reasons it has received quite a lot of criticism. Recent research claims that Bitcoins are being used by anti-social elements, terrorists, hackers and unscrupulous financial companies. We’re going to stay sitting firmly on the fence as to whether there is any truth to such claims.
All we know is that the Bitcoin was designed to be used for making payments through an online platform. They are generally created in accordance with a series of very complicated algorithms that have been developed by some leading programmers. The system offers peer-to-peer transactions that take place between users without an intermediary.
The universally recognised symbols for a Bitcoin, as of 2014, are BTC, XBT, and ฿. Smaller Bitcoin units include millibitcoin (mBTC), microbitcoin (µBTC), and Satoshi. A Satoshi is named in honour of the creator, and is the smallest amount within a Bitcoin: one hundred millionth of a Bitcoin.
What about Bitcoin Forex brokers? Are there very many?
Bitcoins (BTC) were accepted as a valid form of payment for Forex brokers in 2013. As would be expected with such a new form of payment, the uptake of Bitcoin Forex brokers is relatively small. Generally, it is much easier to fund a trading account by more traditional methods; however, Bitcoins are all set to increase in popularity and be accepted by more Forex brokers, as there is no need to disclose bank or card information. There are also a number of brokers that allow traders to trade them against other currencies such as the US dollar and the euro.
How do Bitcoins work?
Bitcoin account holders are given a private key, which has to be kept safe and is used for all future transactions. Should a Bitcoin account holder lose this key, they will be unable to access their account and claim ownership of the Bitcoins. The private key is the only means of identification a user has for accessing their account. Bitcoin transactions are recorded via a blockchain. This tracks transactions and associated units via a public ledger. Transactions have to be digitally signed with the private key in order to be valid. This might seem a little long-winded, but Bitcoin transactions can nevertheless be completed in milliseconds. A single Bitcoin has an inherent high value, but users are able to use denominations of any amount for the Bitcoin transactions, including fractions.
Where does the money for funding a Bitcoin account come from? It is a complicated process, but let’s see if we can explain in the simplest of terms. Bitcoins aren’t received through traditional payment methods. Instead, you get them through a process known as mining. Mining is the process of creating Bitcoins, achieved by solving complex algorithmic problems using high-speed computers that are resource-intensive. It is a very time-consuming process, and a computer with huge computing powers is necessary. An average user will, therefore, find it very difficult to mine for single Bitcoins using meagre resources.
For the average Joe, there is the option of buying Bitcoins from an exchange house, which sells them at the prevailing market rate. Of course, this means the price of a Bitcoin is always fluctuating in accordance with supply and demand. The Bitcoin exchange houses also add a mark-up spread for buying and selling them against major currencies. It is also possible for traders to buy and sell Bitcoins using money available in e-wallets. Neteller is one such payment provider that offers this option.
Are there any advantages to be gained from being a Bitcoin Forex broker?
When it comes to payment methods, Bitcoins are possibly the least favoured amongst Forex brokers. However, there is nothing to indicate that this is going to stay the same. Making payments with Bitcoins is a very secure and anonymous payment method, and cannot be matched by any other payment provider. Users of e-wallets are required to verify their identity with credit cards, bank transfers or other identifying documents, whereas Bitcoin account holders are able to gain access to their Bitcoins without having to worry about an identification procedure – providing, of course, they still have their private key.
Using a Bitcoin Forex broker is not as rosy as it first seems, though. Creating a Bitcoin account to be used for funding a Forex trading account is a rather complicated and tedious process; and the whole idea of anonymity kind of goes out of the window. Because of rules and regulations, Forex brokers tend to require a trader to submit a vast array of documents for the purpose of verification. A trader using Bitcoins for funding their account is therefore unable to remain anonymous. Regulatory agencies require Forex brokers to keep a range of information relating to their customers, in order for them to be allowed to trade in the Forex market.
Are Bitcoins here to stay? And is it worth the time and effort for Bitcoin Forex brokers ? The jury is out on both questions. The value of the Bitcoin has gone through several booms and busts, and there are plenty of experts who make the claim that the Bitcoin is going to eventually die. It’s difficult to predict what is going to happen in the real world, and unless you already have a supply of Bitcoins and are experienced in using them, choosing a Bitcoin Forex broker is possibly not the right move to make. We can only give you some of the details and leave the decision up to you.
