This is a guest post by Waqas Javed. Currently, he is working at the Fuad Ahmed Currency trading expert blog.
The real currency against the digital, can cryptocurrency survive the Forex market?
With the emergence of cryptocurrencies like Bitcoin, Ether, Litecoin and Ripple, the standard financial markets have introduced these currencies to let different trading methods be implemented on them. The question of whether the digital currencies will also become a major participant in the forex market, just like the USD, Euro and other conventional currencies have. Will the flood of cryptocurrencies like other currencies be accepted as legitimate long term trading vehicles and stores of value?
Many big forex traders are now buying and selling cryptocurrencies, out of which Bitcoin is currently by far the most popular one. The purchase of Bitcoin or other cryptocurrencies can currently take place via an online forex trading platform.
The year 2017 saw a massive increase in the prices of Bitcoin, which came as a result of many companies accepting the currency as a medium of payments and deliveries. This gave a huge boost to the development of cryptocurrency business and led to many new currencies becoming part of the financial markets. It also gave rise to the notion that cryptocurrencies are not solely used as an alternative for money, but can also be used as an asset to trade. Jack Dorsey, the co-founder of Twitter had predicted that soon Bitcoin was going to act as a single currency in the world, which with the decline of the prices of Bitcoin seemed to be changing into a dim possibility of becoming a reality. Still, many investors and financial analysts are of the opinion that no matter how many times Bitcoin or any other cryptocurrency fail to replace money, they can be always used as a tradeable asset by investors.
At the end of last year Bitcoin became accepted in the mainstream financial markets as a digital asset which resulted in the inclusion of Bitcoin in the CBOE and CME, the option and future exchanges of Chicago. This initiative instilled the idea of Bitcoin along with other cryptocurrencies being used as a trading commodity and not merely a unit of money. The last year saw an excessive rise of 140% in the prices of Bitcoin, which suddenly fell over 50% from its peak to a deep low after the massive run up to over $19,000. However, this ascertained that the value of cryptocurrencies can be highly volatile which lays the basis for trading as well. The sharp swing, from high to low, in prices, also dictate that cryptocurrencies can better be used as the speculative asset than anything else.
This realization of traders has paved a path for cryptocurrencies in the foreign exchange market too, where these digital currencies are traded alongside other foreign currencies. The foreign exchange spread, in the process of trading and transaction plays a vital role, as they are solely dependent on how much liquidity is available against a currency. The addition of more and more currencies to the foreign exchange will translate into more liquidity for a cryptocurrency.
Foreign exchange markets, on the other hand, have also begun integrating cryptocurrencies into trading, giving way to many companies to become adaptable with the procedure of trading. Companies can also issue tokens in place of assets, these tokens can work like Ether and Ripple. As Bitcoin is the primary unit of cryptocurrencies, it has been accepted by many exchanges that are planning to trade digital currencies in the market and are looking for ways to do so.
The process of transfer of cryptocurrencies through wallets is designed in a manner that the money or coins can be sent through wallets to exchanges or other wallets through a private key. This feature opens many opportunities for users, as the currency can be used for several different purposes like selling, buying and trading the digital currencies.
Trading of cryptocurrencies, due to their decentralized nature is free from any kind of taxation and can be offered at lower rates of transaction and broker fee. Although the brokerage fee depends on the amount of liquidity of a particular currency, a great leverage in fee can be given to traders because of the same no taxation policy.
Trends in the foreign exchange market
In 2017, there erupted great changes in the volumes of trade, which signaled a huge transformation of the financial markets in the world. This phenomenon led to many foreign exchange markets facing a change and introducing cryptocurrencies into different modes of trading.
There have been trends where the central and state banks like that of China, have been issuing guidelines against the use of cryptocurrencies. China singlehandedly, in a warning against the prices of Bitcoin, put sanctions and fees on the trading, which also resulted in the change in prices of foreign exchange and bitcoin around the world.
There has also emerged a new class of digital tokens in the trading markets now. There is diversity in the way evaluations about a currency’s worth is made. The use of Blockchain as an underlying technology has exceeded the market cap of tokens like Ripple and Ether to $100 million. This also means that with such high liquidity, foreign exchange markets can be extended to become bigger in size and trade volume.
The world is seeing great developments in the form of cryptocurrencies and Blockchain technology. Even if these digital coins fail to become a substitute for conventional money, they can always be traded as assets and also take their space in the foreign exchange market.
Waqas Javed is a digital marketing strategist that helps companies to maximize online reach with his unparalleled outreach skills. Currently, he is serving at Fuad Ahmed Currency trading expert blog.