Traveling and earning in multiple currencies and hit by FX volatility? Here’s an easy new way out.

Many Currencies in a World of Change

The world has changed rapidly - under our noses - in recent years. In some ways it’s too fast to keep track of.

But some trends are clear:

  1. Globalization is real
  2. Politics has gone toxic

The second point relates to specific jurisdictional entities - the US, the EU, China, Russia. They are usually associated with issued (fiat) currencies. With politics affecting, as it does, economic policy - FX volatility is inevitable.

We see that in the chart below showing CBOE euro vol and political risk incidents over time (my categorization).

So when I relocated my business from Hong Kong to Europe several years ago - with my family and assets staying behind to follow a year later - these risks suddenly came to the fore.

How FX Vol Affected Me

The euro vs US dollar rate - with the Hong Kong dollar pegged to the US one - came into a period of unexpected volatility just as I moved.

I needed significant, but unpredictable amounts of cash.

My family in Hong Kong needed it too.

So FX volatility was a particular and frustrating concern to me on a day-to-day basis. For one thing it increased the spreads my bank offered me for exchange.

I worked out later that the banks were fleecing me in other ways too. So I stopped FX transactions with banks. It’s not hard to find people providing convenient FX conversion facilities. I went with and haven’t looked back.

But, if you do have funds in one jurisdiction and expenses in another, you have personal FX risk. Well - I’m a financial technologist. I know how to mitigate FX risk: hedge it!

The issue was that reputable a brokerage with reasonable fees required a large initial deposit. A big chunk of the money we needed day-to-day. Alternatively, I could take my chances with one of the fly-by-night CFD (Contract for Difference) sites. These guys - to say the least, lack transparency. And when you take a position, it is with the operator and for their profit. I found no acceptable solution.

And guess what? Nothing has changed since then. Until now.

The Exchange of Good Ideas

Crypto exchange BitMEX changed the crypto industry 6 years ago. In fact they practically invented the crypto trading industry. They did this, mostly by accident through the introduction of the Perpetual Contract. A Perp is a type of short-dated swap without expiry. Most of the other exchanges have copied the idea. There are now multiple billions of turnover in dollar terms, per day, in Perps across exchanges.

It looks like they’ve done it again. But this time it’s a little different. For a typical Perp, like BitMEX’s XBTUSD, the contracts are constructed so that their value changes exactly as does the underlying cryptocurrency - in the XBTUSD case Bitcoin. So it’s like buying Bitcoin without having to pay miners. You typically provide Bitcoin as collateral and can trade on a margin.

With BitMEX’s new innovation, rather than the Perp being on Bitcoin or another cryptocurrency, it’s actually on fiat currencies. You can take positions on 22 currency pairs. Better yet, BitMEX has recently introduced USDT as collateral. USDT is a “stablecoin” that is pegged to the US dollar. Therefore you can have FX positions with no crypto risk (though there is a form of counterparty risk underlying USDT).

Small sizes, minimal collateral, low fees on a robust exchange. Your counterparties are other traders. Just what I’d been looking for all those years ago.

So travelers or global workers like I was need no-longer have to feel stress due to FX fluctuations. I could put a relatively small sum of USDT in my BitMEX account and go short EURUSD to the level I needed to hedge the HKD that I would eventually exchange.

Yes, You can Be an FX Trader

More interestingly, FX traders can now get into the market with extraordinarily little capital and trade a wide range of currency pairs. They will trade as full peers of any other market participant. If you’re new to trading or want to learn by doing, now you can. There’s really no strings attached here.

On the same collateral you can trade all the currency pairs. There are some very interesting and volatile ones, like Turkish lira, Mexican peso or South African rand.

For the keen, BitMEX also offer up to 50 times leverage based on their normal liquidation rules.

With this setup, it is genuinely possible to start with a couple of hundred dollars and trade multiple currency pairs with the same level of efficiency as a professional trader. You can smoothly ramp up your trading as your knowledge and confidence grows.

Track Your FX PnL with ProfitView

Of course ProfitView, by virtue of its full support for BitMEX, supports the FX Perp out-of-the-box. So now you can trade FX and keep track of all your trading - including your crypto - all in the same place.

And that is a pretty big deal.