Bitcoin, the digital currency that saw the light of day in 2009, is on everyone’s lips. From its origins as an underground phenomenon in the cyber world, it has evolved into an alternative to traditional money. Like any other currency, Bitcoin is the object of speculation in the financial markets. The courses are subject to strong fluctuations since the currency is not controlled by a state or a central bank. Rather, Bitcoin is a decentralized system that has no regulatory authority. This distinguishes Bitcoin and other cryptocurrencies from national currencies. This could also impact the forex market where if digital money continues to grow in popularity, investors could shift their wealth to the crypto market. Then the value of Bitcoin and Co would skyrocket, and government money would lose purchasing power. But is such a scenario actually realistic?

The increasing popularity of cryptocurrencies

The introduction of the first cryptocurrencies went almost unnoticed. At that time, only a few in the financial world suspected the enormous potential of this innovation. This was also due to the fact that several attempts to create a digital means of payment had already failed in the 1990s. Over time, however, mistrust subsided and the first investors dared to take the step into the new world. Trading in cryptocurrencies became suitable for the masses through online platforms such as Bitcoin Revolution, which made automated purchase processes accessible to the general public for the first time. The expected price development is calculated using artificial intelligence. This allows the software to process transactions independently. This also gives inexperienced investors access to the market.

What is forex trading?

Forex is nothing more than the foreign exchange market – the abbreviation stands for the English term “Foreign Exchange Market”. The forex market is worth more than $5 trillion on the day the largest financial market in the world. The rate at which each national currency trades is determined by supply and demand in that market. Money is exchanged for a variety of reasons. International trade, for example, requires foreign currencies in order to be able to do business. Even if you want to invest abroad, you first have to buy the local currency. However, a large part of Forex transactions is speculative in nature. Investors buy currencies that they expect to appreciate. Currencies expected to depreciate are sold. Significant profits can be made this way.

Impact of Cryptocurrencies on the Forex Market

Despite the global rise of the various digital currencies, their impact on the forex market has so far been limited. The total value of all world coins accounts for only a fraction of Forex trading volume. And conservative investors are still holding back. The relative stability of exchange rates compared to cryptocurrencies reduces the risk of large losses. In the long term, however, many observers assume that numerous companies active in the foreign exchange market will also integrate cryptocurrencies into their portfolios. There are already first signs of this.

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Politics also has a significant influence on the importance that cryptocurrencies will have in the future. Many states are watching the development with suspicion because they fear a loss of control. It remains to be seen whether restrictive laws could limit the growth trend in the future.

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