The Forex market is the world's center for currency exchange, traders exploit fluctuations in foreign exchange rates to make a profit, the more the currency varies, the greater the profit and the risk.
The principle underlying Forex trading is very similar to Bitcoin trading, where traders exchange a cryptocurrency against another currency, the main goal of trading is to buy at a low price and sell with high profits, however, the unexpected fluctuations in Bitcoin and the factors influencing price payment differ from Forex.
In this article, we will explain the framework for trading bitcoin currency compared to foreign currencies on the trading platform and how Bitcoin is trading against the dollar and other currencies and its impact on the behavior of Bitcoin and Forex.
1. View rates
The amount of foreign currency in circulation is regulated by the specified central banks, while exponent algorithms control the production of the cryptocurrency, as this mechanism regularly lowers the number of bitcoins.
Bitcoin was quickly created initially and production is greatly reduced over several years, although this computerized method is new and difficult to understand for some, it is important to note that it reduces unpredictability because you already know the number of bitcoins that will be produced in The near and far future.
2. Inflation
Many Bitcoin fans believe that Bitcoin is immune to inflation, this may be true for inflation, but not for price level inflation.
The bitcoin algorithm has a maximum of 21 million bitcoins that can be mined, given the fact that it is immune to cash inflation, this is not the case with foreign currencies that are subject to government regulation because they can produce stable currencies at any time which leads to cash inflation.
As for bitcoin inflation and other foreign exchange rates, the factors affecting prices are not converging.
Foreign exchange rates are influenced by many factors such as the state's public debt, interest rates, political stability and economic health. As for bitcoin prices, the factors affecting their prices are more complex in addition to speculative theories.
3. The application rate
One of the advantages of a central currency is uniform demand, since the government controls the rate of its demand and supply, and therefore has an impact on the economy and this is indisputable.
As for bitcoin, this foreign exchange does not have the comfort that bitcoin demand is determined by many factors including public approval, market emergence, and investor confidence in the value of bitcoin.
As the scope of public adoption widens, demand for bitcoin will increase, and with the increase in emerging markets that accept bitcoins, the spread will expand, and bitcoin is negatively affected by public opinion and news stories, such as Gox's bankruptcy and extensive use of bitcoin within the Internet, the participation of the New York Stock Exchange and the Stock Exchange The Nasdaq in blockchain technology has strengthened public opinion about Bitcoin's ability to hold value.
4. Volatility
The maximum volatility for foreign currency pairs is about 1% and the lowest volatility is 0.5%. On the contrary, Bitcoin has a high volatility rate of 5% to 15% with an average volatility of 10%, which is why Bitcoin attracts high-risk investors.
5. Trading platform
Both Forex and Bitcoin offer multiple trading platforms, but Forex outperforms Bitcoin in the number of brokers that offer several platforms for Forex trading.
The main difference between the two is the alternative currencies offered for trading in it. Bitcoin trades regularly with the US dollar in addition to alternative cryptocurrencies, but in Forex trading cryptocurrencies are not exchanged with foreign currencies on Forex platforms but are replaced by lesser-known currencies.
Although there are many similarities between bitcoin and foreign currencies, their heterogeneous behavior says otherwise.
0 Comments