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Bitcoin Binary Options

Written By

William Berg

Written By

William Berg

William contributes to several investment websites, leveraging his experience as a consultant for IPOs in the Nordic market and background providing localization for forex trading software. William has worked as a writer and fact-checker for a long row of financial publications.

» William Berg Profile Page

Edited By

Tobias Robinson

Edited By

Tobias Robinson

Tobias is a partner at DayTrading.com, director of a UK limited company and active trader. He has over 25 years of experience in the financial industry and contributed via CySec to the regulatory response to digital options and CFD trading in Europe. Toby’s expertise and dedication to financial education make him a trusted voice in the industry, including a BBC investigation into digital options.

» Tobias Robinson Profile Page

Updated

May 31, 2024

Combining two modern financial products, bitcoin binary options appeal to both aspiring crypto investors and experienced traders. In this guide, we explain how bitcoin binary options trading works, including the advantages and drawbacks. We’ve also listed the best brokers for bitcoin binary options trading below.

How Bitcoin Binary Options Work

Binary options are a form of fixed-odds financial betting. Depending on the outcome of a “yes/no” condition, there are typically just two possibilities: the trader either receives a payout or loses their stake. Usually, the trader bets on whether the price of an asset will be over or under a set strike price at a particular expiry time. If the trader is successful, the option is said to have expired “in the money”.

In bitcoin binary options trading, the underlying asset is, of course, bitcoin. Expiry times can last anywhere from 30 seconds to a whole day. As an example, imagine you bet $10 that bitcoin’s price will be above $60,000 by 11:00 AM. Your binary options broker offers you a payout of 80%. If you are correct, you receive $18 from the broker, else you lose your $10 bet. Binary options can also sometimes be closed before the expiration date with a reduced payout.

Bitcoin binary options trading is a high-risk, high-reward activity: losses usually outweigh potential returns. With a payout of 70%, traders need to be winning over 60% of the time to make money. Such a success rate is difficult to achieve without an effective trading strategy. After all, bitcoin binary options brokers function essentially like bookmakers – they need to turn a profit.

Bitcoin Explained

Bitcoin is the world’s most famous and widely traded cryptocurrency. Unlike traditional government-issued currencies, bitcoin exists only as a string of data stored on a blockchain. Bitcoin first pioneered blockchain technology, which now underpins all of the many digital currencies.

A blockchain acts as a ledger of every interaction on the bitcoin network. Users known as miners perform the calculations necessary to verify transactions, keeping the blockchain secure. As a reward for mining, they are paid in bitcoin currency (BTC).

Bitcoin has a volatile trading history, with its value going through several rallies and crashes since its inception in 2009. Despite not being accepted as legal tender in most countries, it remains a popular investment. There are now several ways to profit from the digital currency, including bitcoin binary options trading, which allows traders to bet on BTC’s short-term price movements.

How To Start Trading Bitcoin Binary Options

Step 1: Choose A Broker

Factors to consider when choosing a binary options broker include:

Payments

The best bitcoin binary options brokers offer accessible, low-cost deposits and withdrawals. Some brokers require a minimum deposit, typically ranging from $0 to $100. Crypto enthusiasts, on the other hand, may prefer a platform that accepts bitcoin. With that said, if a platform only uses BTC for deposits, be wary, as some dodgy brokers use this tactic to make them harder to trace.

Security

Unfortunately, the bitcoin binary options space is rife with scams. Some fraudulent platforms steal traders’ deposits while others manipulate trading conditions. As a result, it’s important to read platform reviews before registering for an account. It’s also worth being wary of brokers that offer huge profits with low risk.

Demo Accounts

Demo accounts can be a good way to get to grips with bitcoin binary options trading. These accounts allow traders to practice with a limited amount of virtual capital. Many bitcoin binary options brokers offer demo accounts free of charge to new clients.

Bonuses

Brokers often offer attractive deposit bonuses to new BTC binary options traders, however, it’s worth comparing the various promotions on offer. If a bonus seems too good to be true, it might be – only accept promotional offers from reputable firms. Untrustworthy brokers sometimes use deposit bonuses to prevent clients from withdrawing funds, so make sure you read the terms and conditions.

Step 2: Create A Strategy

Many brokers now offer several different contracts for bitcoin binary options trading:

• Over/Under: The classic binary options trade. Clients bet on whether bitcoin’s value will be over or under the strike price by the expiry.
• In/Out: The bet is placed on whether bitcoin’s price will fall inside or outside a particular range. Also known as the ‘tunnel’.
• Touch/No Touch: If bitcoin’s price ‘touches’ a set value before it expires, the trader receives an immediate payout.
• Ladder: Similar to up/down trades, the ladder has strike prices that are staggered up or down. These normally involve a substantial price move to reach. Payouts are often higher than in other contracts, though.
• Highline/Lowline: The trader wins if the Highline target price is higher than the current price, while the Lowline is lower than the current price.

It’s worth remembering that short-term fluctuations in bitcoin’s price are driven by supply and demand. The key to predicting the price movement of BTC is in deciphering the behaviour of other traders. To do this, it is helpful to know how to interpret important charts (like candlesticks) and be familiar with a few technical indicators.

Step 3: Take A Position And Time Your Entry

Is bitcoin’s price going to rise or fall before the option expires? This call will decide what type of binary option you buy. Once you’ve chosen a bullish or bearish position, the final step is timing your entry into the market. Deciding when to hit buy will depend on your strategy, and should be informed by technical analysis.

Pros Of Trading Bitcoin Binary Options

Advantages of investing in bitcoin binary options include:

• Simple, fixed-odds trading – Binary options have two outcomes: win or lose, with a set expiry time. This reduces the number of factors traders have to take into consideration, like when to sell.
• Limited losses – It is impossible to lose more than your initial stake when bitcoin binary options trading.
• Good for crypto experts – Traders familiar with the behaviour of cryptocurrency markets can use bitcoin binary options to exploit trends.
• High volume – Short-term BTC binary options trades can be repeated many times over the course of a single day.
• 24-hour trading – Crypto markets are always open, and the majority of binary options platforms offer round the clock trading.

Cons Of Trading Bitcoin Binary Options

Drawbacks of bitcoin binary options trading include:

• Risks – The payouts for most short-term bitcoin binary options tend to be small (less than 70%). Options which have larger payouts are unlikely to pay off. This means that the odds are generally stacked in favour of the broker.
• Limited trading tools – Many binary options trading platforms have a smaller range of trading tools than other brokers, although the situation is improving. Technical charts and indicators are often key to successful bitcoin binary options strategies.
• Possible scams – Dodgy brokers are common in the bitcoin binary options world. However, by taking the necessary precautions (outlined above), traders can avoid being defrauded.

Final Word On Bitcoin Binary Options Trading

Bitcoin binary options can be a lucrative tool in a trader’s toolbox: they are a simple, straightforward form of trading. By using a well-designed strategy, some bitcoin binary options traders can use their technical knowledge to turn a profit.

To avoid potential scams, traders should approach all new platforms with caution, making use of a demo account where possible. Head to our list of top bitcoin binary options trading brokers to get started today.

FAQs

Are Bitcoin Binary Options Legal?

Some territories, like the UK, have prevented brokers from offering bitcoin binary options trading. However, individuals from these countries can still trade BTC options by using a firm based abroad, though they may receive limited legal protection.

Are Bitcoin Binary Options A Good Investment?

Bitcoin binary options can be a good investment for experienced crypto traders. However, without an effective trading strategy, it may be difficult to turn a profit.

Are Bitcoin Binary Options Brokers Safe?

Fraudulent binary options brokers are all-too-common online. However, by taking precautions, traders can avoid falling prey to these scams. Always make sure that you check the registration status of any new firm.

Do Binary Options Brokers Accept Bitcoin?

A number of binary options brokers will let you deposit in bitcoin. Beware of brokers who only accept bitcoin, however, as this may make it difficult to get your money back.

Can I Trade Binary Options Using A Cryptocurrency Other Than Bitcoin?

Yes, several brokers offer binary options trading using cryptos other than bitcoin, including Pocket Option, Binary.com, IQ Option and Quotex.