Cryptocurrency has come a long way since its inception in 2009 when Bitcoin was first released. They have seen huge gains in value over the last year, and traders have been looking for ways to capitalize on this trend. One of the most popular ways to do so is by using trading platforms that offer currency trading accounts that allow you to trade both FIAT and crypto currency, otherwise known as forex trading. But what exactly does that mean and how can it impact your portfolio?
What you'll learn 👉
What is forex?
Forex, or foreign exchange, is the largest and most liquid financial market in the world. It allows traders to buy and sell different currencies at a given rate of exchange. This means that you can trade one currency for another without ever having to own either currency itself. By using forex to trade crypto currency, you can take advantage of the fluctuations in value between two different currencies.
Traditionally, foreign exchange markets have only used FIAT currencies, which can be described as regular national currencies such as US dollar, the euro, the Japanese yen, etc. However, crypto currencies are becoming ever more present on these types of platforms, and offer an opportunity for investors to put their riches in action.
How can it impact crypto trading?
When trading on forex with crypto, there are both risks and opportunities that you need to be aware of. Among these are decentralization, risk, and profits.
Decentralized trading
The key feature of cryptocurrencies is that they are decentralized. Whereas one might make the argument that forex exchanges are decentralized, the currencies themselves are still backed and controlled by central backs in the countries that issue them, which in turn stabilizes the fiat currencies’ value. Because cryptocurrencies are decentralized, they are less prone to be affected by geopolitical events the same way as fiat currencies.
Higher risk
When it comes to risk, crypto currencies can be extremely volatile: their prices can change rapidly and unexpectedly, creating risk for those who are not prepared. Additionally, trading on forex involves using leverage, which means that you may be taking on a larger financial risk than you would with other types of investments.
Potentially large profits
However, there are also many opportunities when it comes to trading crypto currency with forex. By taking advantage of the volatility in the market, traders can make large profits in a short period of time. Additionally, leveraging your trades can help to increase your potential profits even more. However, it is important to remember that the risk associated with forex trading is much higher than what you would experience when investing in other types of assets, such as stocks or bonds.
Conclusion
The bottom line is that trading crypto currency on forex can have a huge impact on your portfolio if done correctly. By taking a careful and informed approach to trading crypto currency through forex, you can ensure that your portfolio is adequately diversified and have a better chance of realizing substantial returns over time. It is important to remember that there are risks associated with this type of trading, so make sure to do your research and understand the risks before diving in. With careful planning, and an eye for opportunity, you can take advantage of the potential profits that come from trading crypto currencies through forex.
