15th Jun 2020

Here’s Why Your Portfolio is Missing Bitcoin

Cryptocurrencies are the most unique and potentially disruptive assets to have been introduced in the last decade. Bitcoin (BTC), as a decentralised digital currency, has found plenty of use cases around the world, due to its unique features. It allows blockchain-powered monetary transactions, without the need for a central authority, which means low transaction fees, fast payments and complete security.
The digital asset class remains free of the impact of economic and political uncertainties that affect traditional currencies. Moreover, BTC is finite in supply, with only 21 million coins in existence. This makes it a deflationary asset, which can be used as a hedge against inflationary pressures. For instance, the COVID-19 pandemic has led to many Central Banks, like the US Federal Reserve, resorting to massive fiscal stimulus packages and lower interest rates. This can cause devaluation of currencies like the US Dollar (USD) and Euro (EUR), while bitcoin is only impacted by market supply and demand factors.

In short, Bitcoin can be considered as a “safe haven” asset, a way to protect wealth in the event of the collapse of the fiat currency system.

Due to these reasons, cryptocurrencies like Bitcoin have added a fascinating dimension to the forex trading industry. Bitcoin’s low correlation with other currencies, like the USD and EUR, boosts its appeal as a tradable asset, making the trading of BTC to USD popular.
Bitcoin, though not traditional currency, can be available for forex trading. But, trading pairs like BTC/USD can be risky, due to the volatile nature of the digital currency. In the conventional forex markets, price fluctuation is measured in small fractions of a penny, but BTC prices can fall or rise hugely through a single trading day.

A safer way to trade Bitcoin could be speculating on its future price, without actually needing to own the digital asset itself. This can be made possible through Bitcoin CFDs, with BTC’s high volatility offering numerous trading opportunities.
A CFD (Contract for Difference) is a leveraged derivative product that mirrors the movement of the underlying market (in this case, BTC). You won’t actually own physical coins. You would only be speculating on the price direction of BTC/USD. This means no need to interact with an exchange and open wallets, which is a time-consuming process. You will also avoid the fear associated with exchange wallet hacks.
When trading CFDs, you can enter into positions in both rising and falling markets. If you think the value of Bitcoin will fall against the USD, you can enter into a short position, and vice versa. Rapid intraday price movements can provide a range of opportunities for you, whether you are a long- or short-term trader.
Bitcoin is unaffected by monetary and fiscal policies that impact the traditional financial markets. This makes it a safe haven investment during market uncertainty. In 2020, despite a broader market downturn due to the coronavirus pandemic, BTC outperformed every asset class by at least 19% till May 2020, gaining 39% from January to May. With the halving event in 2020, bitcoin’s future supply has been reduced by 50%. Market analysts predict that the coin could reach higher value by the end of 2020.
Trading CFDs is safer than trading cryptocurrencies directly on exchanges, where there might be a risk of wallets getting hacked or traders falling prey to identity fraud. CFD providers are licensed by financial regulatory bodies, which means they need to follow the laws and guidelines for protecting investor interests. This includes fund safety, proper trading tools, investor education and prompt customer support.
Risk management tools like stop-loss and take-profit can be used in CFD trading, which are necessary in volatile markets, like that for BTC. By using them, traders can limit downside risks.

Risk management becomes easier on the MT5 trading platform, offered by Join the first regulated hybrid broker, accepting both crypto and fiat deposits and withdrawals, and start trading Bitcoin.
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