Sunday, 11 December 2016

BITCOIN & FOREX

While talking about Bitcoin as a currency whether it be the in the name of many aliases like crypto currency, digital currency or virtual currency the main orientation of the holder of Bitcoin is to en-cash it as demanded. Is there any value of this simple written amount that has been stored in our digital wallet? Then we say a easy answer is “Yes” it has more value than worth it. As the Bitcoin supply will be limited to the market in future so, the value of this currency will be more & more year-wise. Til now there are 15.9 million Bitcoins are mined and circulated in the market and more than 5000 wallets are in use. Total number of bitcoins can be mined over the period of time not more than 21 million bitcoins and this  is final amount of bitcoins that will be existed in the market and the demand will be increase then due to no more supply of bitcoins the price of the bitcoin will be definitely increase.

 Lets debate on the real value of bitcoin that we can get having this currency. Bitcoins are now accepted as a global currency over the world and everybody using this for their cross border transaction. USA, Canada, Russia, Australia and almost all of the European countries are given acceptance to the Bitcoin and also Bitcoin ATM machine are established in their country for quick cash out. India has also granted permission some of the Banking institution and financial bodies to transact with bitcoin if it really not granted to general public. But there are many transacting over bitcoin regularly. Except bitcoin there are also 600 more crypto currency likewise; Litecoin, Doge coin, Name coin, Peer coin, Dash coin Ethereum. All these are also their derived value. All these currencies are traded, exchanged and transacted daily in the crypto-currency market and also in the fiat currency market. One can exchange any of currency to bitcoin and vice-versa and ultimately can exchange to any of fiat currency to it’s respective country for expense any-where. But, today most of the shoppers, individuals, websites and even big companies like Microsoft, Dell, eBay, Flipkart, Amazon are accepting Bitcoin globally. Many of the forex brokers are also accepted bitcoin payment system as their funding to the client account. So, it’s the matter of no more time consumption to start forex trading within 10 minutes. Now lets have look about forex market understanding.
Meaning


The term Forex is the blending of two words, that is foreign and exchange. The word exchange here refer to the interchange of currencies between the different cross-border parties for their goods and services. With the increasing demand of goods and services across the globe drive the nation to supply the same to fulfill the demand of other nation. Hence, this trade gave birth to globalization, which automatically involved the nation or individual into foreign exchange market. This term Foreign Exchange gradually became shortened to Forex market.
        
Today, man goes beyond it’s limit in the business world where we could just imagine how he surpasses the way of trade from it’s barter system to electronic system. With the growing demand of products & services and increase competition in the domestic market led the business houses to go for internationally. This automatically led to involvement of different currencies. And the demand & supply of these currencies led to exchange rate fluctuation or exchange rate risk. The international monetary system includes rules, regulations, procedure, practices and mechanisms that facilitate settlement of international payments. Whether it be the companies, country or the individual who involved in forex trade should be conversant and familiar with the exchange rate mechanisms so that they can anticipate the appreciation or depreciation of foreign currencies against the domestic currency for investing and financing decisions or trade on Forex market.
        
The existence of number of currencies gives rise to need to transact in different currencies for settling of international payments. This is obvious that at least one of the parties would be dealing in foreign currency while transact in international trade. For Example: If an Indian exporter sells some goods to an American resident and the price of that goods denominated in dollars, the exporter would be dealing in a foreign currency. Similarly, if  an Australian residents makes an investment in the German money market, he would need to deal in German Mark or in Euro which would be a foreign currency to him. Sometimes, both the parties involved in international trade will go for foreign currency because of the price denominated for the product is foreign currency for both the parties. For Example: if the resident of Australia buys a car from a resident of Spain and the and the transaction is denominated in US dollars, both the parties will be dealing in a foreign currency because parties have own Australian dollar & Spanish currency or Euro respectively. The exchange of currency happen due to the buying and selling of other commodities. So, it is difficult to find the buyer and seller of other currency as currency is also termed as a commodity. This fact resulted in the development of a market which deals specifically in currencies, called the foreign exchange market. This is an Over-The-Counter market (OTC) market, that is no physical marketplace where the deals are made. Instead, it is a network of banks, brokers and dealers spread across the various financial centers of the world. These players trade in different currencies through telephones, faxes, computers and other electronic networks powered by Internet like the SWIFT System (Society For Worldwide Interbank Financial Telecommunications). These trade are generally done through a trading room. The deals are mostly done orally with written confirmation following later.

  • Foreign Exchange
Foreign exchange involves all kinds of claims of residents of a country to foreign currency payable abroad.In terms of Indian FEMA Act, 1999, foreign exchange is defined as foreign currency, which includes:
All deposits, credits, balances payable in any foreign currency.
Any drafts, travelers’ cheques, letters of credit and bill of exchange expressed or drawn in Indian currency and payable in foreign currency.
Any instrument giving anyone the option of making it payable either partly or fully in a foreign currency.

  • Market Participant
Foreign exchange market structured by various large commercial banks, Forex brokers, Large corporations, Central banks, Speculators, Hedgers and Traders,. These players are facilitate the settlement of payment with their own point of view.
Commercial Banks:

      These commercial banks act on behalf of their client whether it be the corporates or individuals and also deal with their own accounts. They function as market makers in the forex market. When commercial banks deal with each other it is called as whole sale market or inter bank market and whenever deal with it’s client it is called as retail market.

  • Forex Brokers:
      The foreign exchange brokers do not actually buy or sell any currency, but they bring the buyer and seller together. They mostly deal with major currencies on which they have specialized.

  • Central Banks:
     These Banks act like as a regulator over the market. These banks deal with the large fluctuation of currency which leads to large exchange rate risk.


  • Speculator, Hedger and Trader:
Normally commercial banks are acted as speculator. Along with other function their speculation on the market brings the market greater liquidity.

     Hedging is a technique that is applied by many investors. Normally investor go for sell an asset in future market at a stated price which he has already owned to avoid the any adverse price movement in future.

     Trader always owned an asset for a shorter period of time for a minimum amount of profit.
  • Market Timing
The world-wide forex market is a 24-hour market and virtually open all the 24-hours a day at least one one of the financial markets across the globe. Normally, this market begins from Monday 00:01 hours to Friday 00:59 in accordance with the respective time zone of country.
  • Exchange Rate Quotations
When the price of one currency is stated in terms of another currency it is called exchange rate quotation. There are various types of quotations given by banks which is explained below:
  • American vs. European Quote:
       In an American quote you see that number of units of dollars are expressed per unit of any other currency while in an European quote number of units of any other currency are expressed per dollar.
  • Inter bank Quote vs. Merchant Quote:
       While the quote is given by a bank for another bank it is called Inter bank quote. On the other hand quote given by bank to it’s customer is called Merchant quote. In the Inter bank sector the quote is accepted which bank acted as market maker that is, the bank who is requested by another bank for the quote.
  • Bid and Ask Rate
Generally bid & ask rate is the buying & selling rate of the bank that is given to it’s customer. It is obvious that the bid & ask rate is different. While bank gives quote someone the ask rate or selling rate is higher than the bid or buying rate always. This difference between the bid & ask rate is called spread and it is the cost to bank incurring in transactions. Some of the fact about bid & ask is given below:

The bid rate is always precedes the ask rate. For Example, In a quote of $ per Euro : 1.4656/1.4658, the bid rate is 1.4656 and ask rate is 1.4658. The bid & ask rate either separated by a slash(/) or a dash(-) sign. The quote is always given by banker’s own point of view. That is here on the above quote bank is ready to buy Euro with $1.4656 and sell on $1.4658.   

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