Bitcoins: Everybody is becoming aware of this highly popular digital currency. Many companies have even started receiving and sending payments in Bitcoins. Even our forex market has not remained untouched from the effect of this cryptocurrency. And that is why many traders who hard mine bitcoins do not prefer the normal currency. Of course, due to its numerous benefits that bitcoins offer, but along with the benefits, this trading involves some risks. Let’s have a look at that:
- A Different Class – Cryptocurrencies belong to a different class of assets which are unaccounted with the own mechanism for valuation. When trading in Forex, along with the currency pair transactions, there is an additional transaction of converting to and from Bitcoins. In this case, the profit and loss are highly unexpected. Bitcoins are hard to mine, so losing it is depressing. Be cautious.
- Hacking of Wallet – As bitcoins are free from bank accounts and credit cards, it has its risks of hacking. A hacker can hack the digital wallet and steal your bitcoins, but only when you do not have a good antivirus. However, it is highly possible that he can hack the digital wallet of your broker. To avoid any risk, make sure that you choose an agent who offers theft insurance.
- Volatility – The price of Bitcoin is highly volatile, and this is what many unregulated brokers take advantage of. Suppose a trader transfers two bitcoins with a value to $1000 each to the broker’s wallet. Now, as the price is highly volatile, the value of one bitcoin may fluctuate from $1000 to $1100. An unregulated broker may exchange at the lowest price of $2000 (2 bitcoins x $1000), but when it is the time to withdraw, he will again exchange at the lowest rate. So according to the above example, the trader will get only 1.82 bitcoins ($2000/$1100). The broker may be exchanging it at $1050, but to the trader, it is showing $1100 and paying back 1.82 bitcoins pocketing 0.18 bitcoins.
- Multiple Exchange Rates – While trading in bitcoin, your trader may use different exchange rates, so it is crucial to check which trader is using which exchange rate.
- High Leverage – Although high leverage of up to 1:1000 is beneficial for many experienced traders, it is highly risky for newbies. Practice a lot before playing with the leverage as high as this.
Cryptocurrencies are gaining great popularity, notably bitcoin, but at the same time, these currencies are associated with risk factors. Although it is highly advantageous when it comes to zero fees, you are adding a third currency to your currency pair, and that is why along with keeping a check on the price of the currency pair, you have to keep a check on the price of the bitcoin. Make sure that you use a locally regulated forex broker.