Yee Kok Siong discusses how Bitcoin trading will impact Forex’s activities:
Supply
While foreign currency is regulated by specific central banks, an exponential algorithm controls the creation of the. This automated method decreases volatility and gives you an idea about how many Bitcoins will be created in all.
Inflation
Bitcoin is unaffected by monetary inflation as Bitcoin’s algorithm limits mining once it reaches the upper limit of 21 million Bitcoins. On the other hand, foreign currencies are government regulated and hence, are not immune to monetary inflation. However, price-level inflation impacts both Bitcoin and Forex. Multiple factors including interest rates, nation’s public debt, political stability, and economic health cause steep derivatives that result in foreign currency inflation.
Demand
A centralized currency is uniformly in demand but, Bitcoin’s demand is determined by factors like public approval, emerging marketplace, and the public’s trust in Bitcoin value. The increase in public approval together with emerging markets has expanded the popularity of Bitcoin. In spite of criticism by media, Bitcoin’s demand continues to rise progressively.
Volatility
The volatility in Forex market is around 0.5% to 1% while volatility is around 5% to 15% for Bitcoin. For this reason, Bitcoin appeals to high-risk traders.
Trading Platform
Forex and Bitcoin can be traded over different exchange platforms. The main difference is the alternative currencies such as Litecoin and Dogecoin that are offered for trading. Forex platforms do not incorporate these crypto currencies but replace them with lesser known currencies.
Bitcoin is yet to reach its potential as it has given rise to a risky trading market. Other than the market fluctuations, there are several advantages and disadvantages of trading Bitcoin in forex.