Accepting Bitcoin as a deposit method has presented challenges for Forex Brokers around the world. One other challenge that is often overlooked is Bitcoin Liquidity or the lack thereof. Bitcoin is about as non-traditional an asset there is. This makes sourcing Bitcoin liquidity that much more difficult. Since Bitcoin is primarily an unregulated asset and is not backed by any central government or bank the banks do not provide Bitcoin Liquidity at this time.
Bitcoin Liquidity From Private Exchanges
Most of Bitcoin liquidity comes from a handful of private exchanges. This includes Bitstamp which is located in Slovenia and has the largest volume of all the exchanges. There is also Coinbase which is one of the most prominent names among Bitcoin exchanges. Coinbase allows you to transact Bitcoin in the following currencies: USD, GBP, EUR, and CAD.
Bitcoin Integration for Forex Brokers
There is now a software provider Ibinex, which is designed specifically for Bitcoin integration for Retail Forex Brokers. Ibinex allows Forex Brokers to connect to exchange liquidity on trading platforms like MetaTrader 4. They even claim that the Forex Broker can opt to offer Bitcoin trading on the weekends which is not possible for other assets.
The Exchange Model Needs To Mature
There are those that question if the “exchange model” is the best for Bitcoin liquidity. It is not the most efficient. If at some point Banks entered into the Bitcoin market the situation could change dramatically. It might be that companies like Saxo Bank and IG Markets step up first and bridge the liquidity gap as they have in the past for other assets. This can allow the mid-size and smaller Brokers to offer BTC trading without as many risk concerns.
Bitcoin has made its mark in the world of e-commerce. The question still remains if it will be traded on the same level as all of the other Currencies out there. As technology improves and larger players enter the market it won’t be long before we see BTCUSD at a Forex Broker near you.
Trading Forex and Derivatives carries a high level of risk, including the risk of losing substantially more than your initial investment. Also, you do not own or have any rights to the underlying assets. The effect of leverage is that both gains and losses are magnified. You should only trade if you can afford to carry these risks. Trading Derivatives may not be suitable for all investors, so please ensure that you fully understand the risks involved, and seek independent advice if necessary