With the BTC EUR markets being interesting to keep an eye on for many traders, as the fluctuations in the market can make for an exciting investment opportunity, it is highly likely that we’ll begin to see more integration between the two. Here, we’re taking a closer look at whether or not Bitcoin is impeding on foreign exchange markets or helping them to grow.
The Integration Of Bitcoin In Trading
A standard trade in the foreign exchange markets work by a trader betting on a particular currency against another currency. For example, if you were to bet on the British Pound against the US dollar (GBP/USD), you could deposit $100 and receive £50 for your $100 if the rate is $1 = £0.5. If the rate changes to 0.45, you can close the position at 50/0.45 which is equivalent to $111.11, seeing you make 11.11% profit. When it comes to integrating Bitcoin however, you are able to change this final step to withdrawing your funds as Bitcoin, instead. In this scenario, even if you earn 11.11% profit with your British pounds bet, the volatility of the Bitcoin could see you make a loss.
The numbers can be exceptionally confusing for brand new traders, but the point here is that the volatility of Bitcoin and other cryptocurrencies could see your bet skyrocket in profit, or alternatively see you closing at a loss.
With other exchanges such as NASDAQ announcing support for Bitcoin amongst a series of other cryptocurrencies, it is highly likely that we are set to see Bitcoin beginning to be integrated within a series of different trading markets. This suggests that cryptocurrencies will help to further grow different types of trading, as opposed to impeding it.
Increased Accessibility
If people are able to trade with Bitcoin and enter markets through an integrated platform online, then these markets are likely to become far more accessible and therefore grow. With the possibility of the ‘unbanked’ population around the world able to access these features through their cryptocurrency wallets, trader limitations on a global scale will cease to exist. As a result, Bitcoin is set to further increase over time.
React In The Same Way
Cryptocurrencies and fiat currencies typically react in a similar way, particularly when it comes to political stability. While economies themselves can have a huge impact on the volatility of fiat currencies, any mentions about regulating cryptocurrencies from a significant political leader can impact Bitcoin markets. As a result, the markets are typically easy to predict and as they react in a similar way, and you can find that major political events can impact both markets equally.
Market Capitalisation
When it comes to determining whether to trade in some of the world’s most popular markets or alternatively turn to cryptocurrencies, understanding market size is important, as this can then help to determine liquidity, depth and overall stability. However, with rapidly advancing technologies, market capitalisation between the two is beginning to narrow. While cryptocurrencies are traded on a much smaller scale, the popularity of these digital currencies are helping to drive the market significantly. The value of cryptocurrencies has proven it to be desirable, but the large scale of other markets means they are unlikely to ever be impeded by the new technology. However, the lack of price volatility in the typically stable markets such as foreign exchange, NASDAQ, FTSE100 and more means that realising regular profits can be more difficult, further showing the potential of Bitcoin.
As a whole, cryptocurrencies and the blockchain technology behind them are helping to make other markets, including foreign exchange markets, far more accessible, which can help to grow the trade options that are available across the globe. With the volatile nature and small scale of cryptocurrencies, while they offer high amounts of value from the trade in some circumstances, particularly during a bubble, foreign exchange is likely to continue as the major trade market around the world with Bitcoin supporting it, instead of impeding it.
