What is Forex? Foreign Exchange market or simply FOREX is a market for cryptocurrencies.
Forex trading is available to anyone with access to the computer and Internet.
For a trading beginner this area could be difficult to comprehend. That’s mostly because new traders are under the impression that handling cryptocurrencies would bring them wealth overnight. However, the cryptocurrencies market is as fluctual as the monetary market and it would be best to familiarize yourself with the Forex market a little bit better if you have a knack to participate in this uncertain world.
Forex market or forex trading is a world of trading cryptocurrencies and understanding their influence on the general monetary market.
Forex market is open 24 hours a day, 5 and a half days a week, allowing currencies to be exchanged worldwide in the major financial centers across the world, including almost every time zone. The financial centers are based in London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris and Sydney.
The unique aspect of the forex market is that there is no central marketplace for foreign exchange. Currencies are traded electronically, using the OTC or Over-The-Counter mode. That means, all the trading is done via computer networks between traders and the world and not in one centralized exchange.
Nevertheless, the market is extremely active any time of the day and price quotes are changing constantly.
Cryptocurrencies are virtual or digital currencies, secured by cryptography which makes them protected from counterfeit and being double spent.
On one hand cryptocurrencies are becoming ever more popular due to their portability, transparency, inflation resistance and divisibility, but on the other hand they are facing criticism on a daily basis because they are often used for illegal activities, their exchange rate volatility and the vulnerabilities of the infrastructure underlying them.
The word cryptocurrencies arrives from the encryption technique that is used to secure the network. There is elliptical curve encryption, public-private key pairs and hashing functions.
In addition, they use Blockchains, organisational methods for ensuring the integrity of the transactional data. Many experts believe that the cryptocurrencies and forex trading could disrupt lots of industries, including the financial and law ones, thanks to the blockchains and other related technology.
The first blockchain based cryptocurrency is Bitcoin. To this day Bitcoin is the most valuable and most popular type of cryptocurrency.
Other cryptocurrencies derived from a form of Bitcoin while others were built from scratch and are completely new.
The Bitcoin currency was first introduced in 2009 by an individual or a group of people under a pseudonym Satoshi Nakamoto and in just 10 years time there were over 18 million bitcoins in circulation with a marketed value of 146 billion US dollars.
Other cryptocurrencies, influenced by Bitcoins success are mostly called ‘altcoins’ and there are several to choose from. The names are Litecoin, Namecoin, Peercoin, Etherum, Cardano and EOS. Accumulated cryptocurrency market value today is over 214 billion US dollars and the Bitcoin alone represents 68% of the total value.
Advantages and disadvantages of working with cryptocurrencies
The advantage of dealing with cryptocurrencies is that you don’t need a third party present to make money transfers, like a bank or a credit card institution, the transfer is easily done between two parties without any additional fees and steep charges like with wire transfer. The said transfers are additionally protected with private and public keys and other forms of incentive systems.
Market prices for cryptocurrencies are based on supply and demand so the rate at which a cryptocurrency can be exchanged can fluctuate widely and this makes them, according to the economists worldwide, an unstable form of currency or a short lived trend.
For example, the Bitcoin experienced some fast surges and collapses, being worth over 19,000 Us dollars per Bitcoin in 2017, but already in the following months dropped its value under 7000 US dollars.
Another major concern when dealing with cryptocurrencies is the anonymous nature of transacting them which opens possibilities for illegal activities like money laundering or tax evasion.
Bitcoin, though, would be a rather poor choice for conducting illegal business online, because the forensic analysis of the Bitcoin blockchain has helped the legal authorities to track and prosecute criminals. However, more private digital currencies exist and are to be dealt with extreme caution.
Buying and selling cryptocurrencies
If you’re looking to try buying and selling cryptocurrencies, first let us introduce CFD. CFD is short for Contract for difference and this way of trading means you’ve agreed to exchange the difference in the price of an asset from the point at which the contract was made to the point of its closure. CFD buying and selling cryptocurrencies involves different types of contracts that can cover different markets like energy and metal. Other markets, like Forex, include pure currency trading.
Other ways of buying and selling cryptocurrencies are Cryptocurrency and Foreign Exchange Market (Forex). Fact is that these two markets are separate, operating under different guidelines but both come with specific details that are more appealing to the traders.
Currencies in the Forex market come backed by a centralized government and the ones on Cryptocurrency are hosted online and backed by a peer-to-peer verification process. This kind of process ensures that cryptocurrency isn’t used more than once.
When buying and selling cryptocurrencies it is worth knowing that the Forex market is the largest and most liquid market in the world. All currencies are exchanged there and on average day 5.3 trillion US dollars is generated. The forex market depends on many factors like political announcements or inflation numbers. This can make things easier for a serious investor who can monitor the situation and apply techniques of historically proven fundamental analysis to find trading opportunities.
Another appealing fact when buying and selling cryptocurrencies is that the Forex market has an infinite supply of crypto currencies as it consists of the world’s global financial markets. It also has more participants than any other market in the world, which makes it fast and simple to trade bigger amounts of currency.