When we talk about the Forex market, we are referring to the purchase / sale of currency in any part of the world. Each time you do a transaction of exchange of one currency to another, we participate in the Forex market. Now, we wonder: is There a relationship with the market of cryptocurrencies?
Surely at some time in your life you will have changed your currency to another, as, for example, pesos to dollars or vice versa. Well, to make this transaction you have participated without realizing the Forex market.
Now, if for example I have us dollars, or argentine pesos, and the exchange for Bitcoins, Am I participating in the Forex market? This question will try to answer in this post.
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About the Forex market
The foreign exchange market, more commonly known as Forex (FX) is a global market where traded currencies 24 hours a day from Monday to Friday. He was born with the aim of assisting the monetary flow that is derived from international transactions.
According to the Bank of International settlements, the Forex market, on average in April of 2019 a daily volume of 6.6 billion dollars, making it the largest market in the world.
To understand the Forex market is simple, it is the buying of one currency and the simultaneous sale of another. For example, I buy euros and sell us dollars (EURUSD).
Forex quotes are symbolized in currency pairs, being the most known the Euro / us Dollar (EURUSD). They also have great relevance to the Euro / Pound (EURGBP), British Pound / Dollar (GBPUSD) and us Dollar / Yen (USDJPY).
Panel rates with the main currencies in the Forex market. Source: Plus500
What the cryptocurrencies are currency?
It is a complicated answer, and will depend a lot on who you consult… on the one side are those who think that the cryptocurrencies are a currency, as with them you can buy goods and services, as well as a currency traditional. On the other hand, there are those who think that it is a store of value, like gold, for example.
If you listen to any of the 2 positions, you bases because it is a currency or store of value.
It is true that with Bitcoin, you can buy some goods and services, just as you would with any other currency. But, personally, I think that the Bitcoin was born with the intention of becoming a reserve of a digital value. At least, that is the spirit in the White Paper of Satoshi Nakamoto.
Bitcoin, and the cryptocurrencies in general, are a breakthrough technology that have come to change the paradigm of which is the money.
Historical contribution of the Bitcoin (BTCUSD). Source: Yahoo Finance
Is there a connection between Forex and the Cryptocurrencies?
Absolutely IF. Always buy a criptomoneda with money fiat we are participating indirectly in the Forex market.
We must not lose sight of that at the “end of the day” everything is about money. All, or at least almost everything, has a price. For example, if you say one ounce of gold, no one doubts that it is a reserve of value, but we must not forget that it is to acquire there to do an exchange for money fiat, the same thing happens with the cryptocurrencies.
To finish, the Bitcoin and the cryptocurrencies in general are a reserve of value, at least in the opinion of those who write them. But to buy a BTC or any other crypto, you need to exchange it for money, what drives you to participate in the Forex market. How everything is connected?