What are Bitcoin Binary Options?
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As Bitcoin continues to grow in popularity, an increasing number of financial institutions are beginning to adopt the newly emerged virtual asset.
As a result, traders now have multiple trading and investing options at their disposal.
Among these is Bitcoin Binary Options, which has been introduced to the Bitcoin trading landscape quite recently.
Due to its straightforward nature and great profit potential, Bitcoin binary options seem attractive to both beginners and expert traders.
How Bitcoin Binary Options Work?
Bitcoin binary options work like any other binary options in traditional markets. Binary options are technically a sort of financial betting where odds are fixed beforehand. This type of trading is based on a simple “yes/no condition” where there are only two possible outcomes, i.e., the trader either receives a profit based on their predictions or loses their invested amount.
Usually, the trader has to make a prediction for the price of any given asset to either be above or below a given price level after a certain period. If the prediction proves to be right after the expiry time, the option is said to have ended “in the money” or otherwise, “out of the money” if the prediction is wrong. To better understand what these trading terms are, check out this handy online trading glossary with all terms explained.
Bitcoin binary options work exactly the same. However, the rapid price fluctuations make it even more interesting for traders as compared to binary options for other assets. Expiry times can range anywhere from a few seconds to 24 hours. For instance, a trader bets $100 that Bitcoin’s price will be above $24,000 in the next five minutes. If by the end of the expiry time, the price of Bitcoin is above $24,000 even by a cent, the trader will receive a payout, which can be as high as 80% of the invested amount.
Benefits of Bitcoin Binary Options
Following are some of the reasons why Bitcoin binary options are so popular among daily traders.
1. Simple and Easy
Unlike traditional trading options, where you have to take care of several factors, Bitcoin binary options are much simpler and easier to execute. You simply select an expiry time and make one of the only two predictions available.
2. Limited Loss
Probably the most significant advantage of Bitcoin binary options for beginners is that you cannot lose more than the amount you used to bet. Other trading options, such as futures and margins, also hurt your overall account balance when you make a bad trade, increasing the risk potential.
3. High Payout
Bitcoin binary options brokers often offer quite a high payout which can go as high as 80%-88%, depending on certain factors.
4. Quick Turnarounds
Thanks to the volatile nature of Bitcoin, on top of the ability to set quick expiry times, a skilled trader can earn very attractive profits with Bitcoin binary options.
The Downsides of Bitcoin Binary Options
Despite all their benefits, there are some downsides to Bitcoin binary options.
1. High-Risk Factor
When looking at Bitcoin binary options deeply, we can see that the odds are usually in favor of brokers. Most short-term options seldom have a high payout. And options with high payouts are less likely to end up in the form of money. This makes Bitcoin binary options almost similar to plain gambling.
Scams are very common when it comes to Bitcoin binary options. A large portion of the market is populated with dodgy brokers. As a result, Bitcoin binary options are banned in a significant number of countries.
Things to Consider for Bitcoin Binary Options
There are multiple factors to keep in mind when you’re stepping into the world of Bitcoin binary options. Following are some of the most important considerations you need to make.
Choosing the Right Broker
As mentioned before, there is a general lack of reliable brokers and trading platforms in the Bitcoin binary options market. One has to be extra careful when choosing a broker to trade BTC binary options. Moreover, it is recommended to compare different platforms in order to evaluate which one offers better payouts, bonuses, and payment methods. Finally, it’s crucial to ensure the broker you choose to go with is regulated and licensed by your local government.
Formulating a Proper Strategy
It’s almost impossible to get successful with Bitcoin binary options without a well-constructed strategy. Some traders prefer to make trading decisions based on market developments, ongoing news trends, regulatory restrictions, etc. Such traders are known as fundamental traders.
The other type of trader is known as a technical trader. These traders formulate their trading strategy based on the technical analysis of the price chart. This involves using several technical indicators, such as RSI, Fibonacci retracements, and Bollinger Bands. These indicators give traders a good idea of where the market is headed.
Bitcoin binary options attract a lot of interest from new and seasoned traders alike because of the straightforward process of trading and the potential to earn huge profits very quickly. Moreover, educating oneself about the market and following a well-thought-out trading strategy can further help increase your profit potential.
However, it is crucial to remember that Bitcoin is a highly-volatile asset with prices constantly fluctuating. Most financial advisors recommend investing only a small portion of your overall investment portfolio in Bitcoin and other cryptocurrencies.
The editorial content of OriginStamp AG does not constitute a recommendation for investment or purchase advice. In principle, an investment can also lead to a total loss. Therefore, please seek advice before making an investment decision.