Unless you have been living under a rock or on the moon, you have probably heard the word Bitcoin. Many of you own it, use it, spend it and acquire it for various purposes. This time, we will discuss using Bitcoin as a preferred funding method for your FX account.
One of the steps in starting a forex trading account is to ensure you have a proper payment channel with which to deposit and withdraw your trading profits or account capital. Before the vast developments that have created an evolution of cryptocurrencies as a payment method, the standard payment method used to be via bank wire. For many years, many traders outside the Western world could only fund their accounts using banks. Those fortunate to live in societies where the use of credit cards was widespread were allowed to use these as a funding method, subject to approval by brokerages that had the technology to authenticate genuine card payments.
The use of bank wires was expensive, time-consuming and a genuine pain. You would have to visit the bank, fill out some long forms, and expect to pay up to $50 per transaction irrespective of the amount being transferred to the broker. If you were receiving money, you could also expect the bank to take off some charges. There are countries where a single bank transfer incurs value-added tax, telex charges and a commission. The annoying part was that it sometimes took up to 7 days for such payments to clear. If you had an emergency and needed money fast, using any profits made on your trading account was out of it.
Then came some of the popular e-wallets today: PayPal, Neteller, Skrill, Webmoney, etc. While these saved on fees and reduced transaction times, traders reported problems in certain countries. Such problems included:
Try an internet search, and you will be amazed at the kinds of problems reported by users of these e-wallets. Of special mention is Payoneer. After the Wirecard fraud saga, using a Payoneer account has become riskier. Hundreds of Facebook and other social media groups detail how users have lost thousands of dollars in inexplicable fund seizures.
Then the cryptocurrencies came, and with their advent, 99% of the funding issues have disappeared. Bitcoin was the first crypto developed and used more than any other crypto payment channel for FX accounts. It was fast, anonymous and was also convertible to fiat currency. Despite many other cryptos having better features such as lower fees and faster confirmations, Bitcoin remains a mainstay of crypto-based funding of FX trading accounts.
With the challenges inherent in using the conventional fiat-money-based payment channels, it became clear that there was a need to develop something better. The problems mentioned above were not just trader-centric issues. The inability to take payments from countries with large potential markets also cost brokers millions of dollars in lost business.
Satoshi Nakamoto did not create Bitcoin as a payment channel for FX trading. But Bitcoin had certain inherent features that made it amenable to solving the problems with account funding. Some of these features are:
A scan of several FX broker platforms, especially the ones listed on this site, indicates that there are two ways of using Bitcoin as a funding method for your trading account.
The first is a direct funding method. Here, the broker has a Bitcoin wallet to which the trader can send Bitcoin directly. This is a crypto-crypto funding method. The traders must present proof that the wallet they are sending from belongs to them. This could be in the form of presenting a snapshot showing the wallet address and the trader's details, such as a username or something that can identify the trader. This step is necessary to prevent using the broker's wallet as a conduit for Bitcoin stolen from compromised wallets. Once authenticated, the broker then credits the trader's account with the fiat-currency equivalent of the Bitcoin. This method works in countries where conventional banking systems prohibit crypto transactions. It is also for those who have access to Bitcoin from their sources, which comes with the advantage that fees paid are lower and more money can be obtained from a certain amount of Bitcoin.
The second method is a fiat-crypto transaction method. With this method, the trader can purchase Bitcoin using a credit/debit card from a third-party source. This method uses an API link from the broker's deposit page, which connects to the third-party gateway such as Simplex, Bitpay or other gateways. The trader enters the amount of Bitcoin to be purchased using the fiat equivalent on the card, and the trader is redirected back to the broker's page after the transaction is complete. The trader would see that the funds have been credited. This method works for traders in countries where the financial regulators permit such transactions. The disadvantage is that the trader will pay more fees, as the third-party supplier will add a service charge (their profit) onto the regular network fees.
Some advantages of using Bitcoin as a funding method are already evident from what has been written. But to summarize them, they are as follows:
Despite the disadvantages, using Bitcoin as an FX funding method comes with far more benefits than risks. It has made forex trading more enjoyable. You can fund your account in the morning, trade in the afternoon, withdraw in the evening and have time to convert your profits to spend as you wish. It also allows traders who may have a need for cash for emergency purposes to quickly access their funds to deal with such issues. These are not possible using the old methods.
The brokers listed here are all Bitcoin forex brokers that are compliant with Bitcoin usage and give you a stress-free funding experience for your trading activities.