Bitcoin features worth knowing before investing with Forex brokers
Most people who wish to deal in Bitcoin have sufficient information about the coin. However, for the sake of inclusivity, we highlight some of the unique features of this altcoin that set it apart from the standard currencies. The knowledge is pertinent to understanding how Bitcoin trading works.
Currency and system
It is essential to understand that people use the term “Bitcoin” interchangeably to refer to a system and a currency. Much talk is about the token or currency. It is a code that represents ownership. The other “Bitcoin” is a protocol that keeps a record of the token. It is based on another innovative technology called the blockchain, which is a study on its own. Bitcoin Forex brokers deal in the token, that was obvious, right?
Beyond external control
Bitcoin currency is beyond the power of the government or other agencies that control fiat currencies. This is because it is created and stored on a decentralized network of computers located all over the world. The primary reason for the creation of Bitcoin and the consequent cryptocurrencies was to have a form of exchange that is beyond the control of the powers that be such as banks and governments
Anonymity
Transactions and trades involving common currency require verification of personal details for processing. Such is unlike Bitcoin where the system only recognizes owners by the address of their wallet address. Consequently, it is difficult to tie a transaction to the real person. The feature made the currency a favorite payment method on sites such as the Dark Web and others that sold illicit drugs and other illegal merchandise.
Irreversibility
Transactions using Bitcoin are written in stone. If you sell Bitcoin to a person, you cannot reverse it. You can try a few tricks available online, but no one guarantees their success. It is unlike the traditional currency transactions that can be modified even days after their completion. Such immutability proves the tamper-proof nature of the Bitcoin system.
Allows tiny transactions
Like the traditional currency, Bitcoin also comes in smaller portions. The smallest unit bears the name of the person or group credited with its creation, Satoshi. One Satoshi is a ten-millionth of a Bitcoin. Such allows transactions to minimal levels, which are inconceivable with standard electronic money.
A digital Asset
Investors have turned to Bitcoin and other cryptocurrencies such as Ethereum, Litecoin, and Ripple as part of their asset portfolio. The next section of this guide outlines the ways of making money by trading these coins.
A promising future
Despite the headwinds that it is bound to face, experts seem to be pessimistic about the future of Bitcoin. The forecasts indicate that the price might go up three times in the next three years to reach over $100,000 per coin. However, like valuable metals such as gold, Bitcoin is going to be limited in supply. The limit of the number of mineable bitcoins is 21 million, coders have been able to mine 12 million Bitcoins. Therefore, there is no possibility of the market getting flooded with this cryptocurrency.
Ways of trading in Bitcoin
Coin exchanges
The most stable platform for trading bitcoins is the coin exchanges such as Coinbase, Coinmama, Bitfinex, Kraken, Binance, and others. You need to create an e-wallet with the exchange to make transactions. The procedure of loading currencies such as dollars into the wallet varies from one exchange to another. You can then buy Bitcoins with the amount in your wallet. You become a direct owner of the coins. You can then transfer them to your dedicated Bitcoin wallet.
Pros
You have total control of the bitcoins
You can use multiple wallets to store your digital assets
There is no counterparty involved in the transaction
Cons
The main disadvantage of using exchanges to trade bitcoins is the security of the e-wallets. If you lose your private key, it becomes impossible to access the wallet. Again, the platforms have lost lots of money to hackers in the past years.
Trading in ETFs and ETPs
Bitcoin-related securities provide traders with an alternative means of buying and holding their digital assets for the long term. It eliminates the need for private keys. TD Ameritrade, Fidelity, and Saxo Bank are some of the stockbrokers that trade in bitcoin futures and securities.
One of the limitations of this arrangement is the variance in the structure of the Bitcoin system, which may lead to tracking errors. Another drawback is that most of the securities are not tradable round the clock as Bitcoin. The digital asset might also end up illiquid when the available amount of the securities is less than the value of the Bitcoin
Trading Bitcoins in Bitcoin Forex Brokers
Several Forex brokers have included Bitcoin as one of their trading assets. Consequently, you can make money by trading your digital asset on one of these broker platforms. The main benefit of trading with Forex brokers is that you do not need a private key.
Trading on a Bitcoin Forex broker is, by no means, without risk. First, the safety of your investment depends on the creditworthiness of the broker. In the event of high market volatility, you risk losing all your assets, just as you would if you traded using conventional currency. Again, you are still on the losing end if the broker ends up bankrupt
Such counterparty-related risks make choosing a broker a vital part of the trading process. First, however, let us share some tips for safe trading on Bitcoins:
Follow up on Bitcoin news and other Cryptocurrencies. While it is wise to avoid unstable altcoins, do not keep your eyes off the trends and latest news. You never know when an opportunity may present itself as these minor players mature.
Do not keep them on the trading exchanges for long. The platforms are prone to hacking and sometimes collapse. You can avoid the risk by storing your coins in an independent wallet.
Spend time learning how to interpret and use Technical Analysis data and charts. You can do this by monitoring the reaction of the markets during specific news release hours.
Diversify your investments. The “never put your eggs in one basket” nugget of wisdom applies to cryptocurrency trading too. Do not invest all your coins in one Bitcoin Forex broker.
How to choose a Bitcoin Forex broker
The following factors will determine if a Forex broker meets your needs or not.
Regulation
Regulation ensures that your investment is secure and the trading legal. It is vital to reconcile the fact that most Bitcoin exchanges and Forex brokers are not regulated. Dealing with a licensed broker comes in handy when an emergency strikes like when the market becomes highly volatile.
Availability of a demo account
You should test your trading skills and strategies before putting your money into the system. Reputable brokers will provide demo accounts that you can use to determine if you are good to go or should find another broker or try a different form of trading.
Minimum deposit limit
There is no one-fits-all rule on how to choose a broker based on the deposit requirement. The rule of thumb, however, is that you do not put more than you are willing to lose. The deposit limit varies from one broker to another. Some have no minimum restrictions while others have a very high requirement. Just go for the one you can comfortably afford.
Customer support
The first place to check when hunting for an excellent Bitcoin broker is the support system. Like all traders, you will need help along the way. Test if the potential broker has an efficient support system. One of the factors to consider is the different support options such as phone number, live chat, or email. Does the customer service staff take too long to reply to your inquiry? Take a peep at its support policies to see if it meets the description of adequate customer support service.
Provision of educational insights
Providing customers with relevant information to help them with their trading is part of the customer support system. You undoubtedly do not know everything about Bitcoin trading. Even if you do, you will need to monitor the latest trends and other life hacks that may make your trading life easy. A broker that does not care to put this information together for its investors is without a doubt, not a good option.
Hidden fees in the incentives
Bitcoin Forex brokers that are hunting for new investors offer incentives to those who invest using cryptocurrency. It is essential to check the terms and conditions that accompany such promotions. Some of them come with hidden fees and restrictions which may make your trading on harder than it should be.
Leverages
Cryptocurrency brokers provide leverage on digital assets because of their high volatility. It is prudent to avoid using a lot of it. This is because of the possible havoc it might cause to your investment when the tide is against you.
Trading platform
You should choose a trader that uses an available trading platform, is simple to use, and depends on your level of expertise. MT4 is one of the standard platforms. It provides excellent trade analysis and tracking. You can opt for the MT 5 if you need a platform that provides a Depth of Market functionality. Depending on the type of broker, the feature may come in handy as it reveals the current market prices.
Another factor worth taking into consideration when choosing a trading platform is the ease of access. Are you planning to use your PC or mobile phone? MT4 and Trading Station have mobile apps for mobile devices.
Does the broker deal in Bitcoin or Bitcoin Cash?
There are two types of Bitcoin currencies on the market today. Bitcoin is the token, BTC, and Bitcoin cash, BCH. The BCH entered the market in August 2017 after a civil war among the miners. They could not agree on the right block sizes and ended up in two different camps. The inability to resolve the impasse led to the creation of BCH with 8MB blocks and the other sect remained with the original bitcoin having 1MB blocks.
BCH by the time of this writing had become the fourth-ranking cryptocurrency after the parent Bitcoin, Ethereum, and Ripple. It began at a price of about $400 and dropped to an all-time low of $206 within two days. Its price had risen to $989.2 at the time of this writing. Market experts forecast that the trend will continue in the coming months and years. However, this depends on the decision by vendors to accept it. Brokers that offer BCH trading also allow BTC trading. However, not all BTC Forex brokers accept BCH traders. If you plan to start with the cheaper option, then you will have to find specific brokers that handle your BCH.
Summary
The hype about cryptocurrencies as a profitable trading currency is not ending soon. However, it is important to remember that like all means of trade; you risk losing. Trading with a regulated broker ensures that you protect your bottom line in case the market plummets. Learn all you can before diving into Bitcoin trading and continue learning along the way.