Cryptocurrency Binary Options

Crypto binary options offer a straightforward way to speculate on popular digital currencies like Bitcoin. The win-or-lose-all products can also be an effective way to diversify trading portfolios. This guide will explain how cryptocurrency binary options work, alongside tips for getting started and the best brokers and platforms.

The Best Brokers For Trading Cryptocurrency  in the Netherlands

How Crypto Binary Options Work

When trading cryptocurrencies with binary options, investors essentially predict whether the price of a particular token will rise or fall. If they are correct, they finish ‘in the money’ and win a pay-out. However, if they are mistaken, they lose their initial deposit.

Let’s say a retail trader invests $50 in a Bitcoin binary option and the broker offers a $40 pay-out. If the investor finishes ‘in the money’, they receive $90. However, if they finish ‘out of money’, they lose the $50 outlay.

Cryptocurrencies Explained

To trade crypto binary options, you should understand how digital currencies work. Cryptos are essentially built on a network of computers, known as nodes.

Everyone on the blockchain validates each transaction, meaning individuals can’t tamper with payments or fabricate transfer history.

Importantly, the decentralized nature of these structures allows them to exist independently of regulatory authorities and governments.

But while crypto tokens can be mined or bought on exchanges, binary options contracts are derivative products.

This means you do not buy and hold the token itself. Instead, you speculate on the price without holding the underlying asset.

The value of popular tokens can swing by up to 10% in a single day.

Smaller coins can even fluctuate by up to 50% in a single trading session. This makes crypto investing inherently risky. And while binary options contracts ensure you won’t physically take ownership of tokens, their volatile nature can still lead to large losses.

Pros of Crypto Binary Options

• Beginner Friendly – The straightforward nature of binary options contracts makes them popular with trading beginners
• Fixed Payouts – Traders know how much they stand to win or lose before entering a position
• Limited Risk – You can only lose 100% of your deposit, unlike some leveraged products that operate without negative balance protection
• Popularity – Cryptocurrency binary options are on the rise, fuelled in part by online discussion forums on the likes of Reddit. This means investors can speak to like-minded traders to exchange tips and strategy ideas

Cons of Crypto Binary Options

• Country Restrictions – Some regulators have clamped down on cryptocurrency trading and binary options products. The US, for example, only allows binary options trading on regulated, central exchanges. The UK’s FCA has also banned the sale of retail binary options products. This means traders will need to register with offshore exchanges and platforms
• Scams – Although rare, some traders have been scammed out of their crypto holdings. Equally, there are some unreputable binary options trading platforms online. See our list of the best brokers to avoid potential scams
• Limited Assets – Not all crypto tokens are available as binary options contracts. While leading tokens like Bitcoin, Litecoin and Ethereum are commonly offered, emerging coins may be unavailable or come with less favourable payouts

How to Trade Crypto Binary Options

Choose a Broker

Before you can start trading cryptocurrency binary options, you first need to choose a broker. Important considerations include:

• Limits & Fees – Some platforms have strict withdrawal limits or collect an additional fee from both sides of the sale, reducing your maximum profit. Brokers with the highest payouts are usually the most desirable, but this shouldn’t be the only factor
• Reputation – Only use legitimate and trustworthy platforms. See our list of the best binary options brokers to sign up with a reliable provider
• Demo Account – The top brokers offer a free demo account so you can practice without risking capital. This is particularly useful for beginners. Experienced traders can also hone strategies using paper trading accounts
• Coins – Some brokers offer binary options contracts on a dozen or more cryptocurrencies while other platforms may only offer contracts on Bitcoin or Litecoin. Make sure you open an account with a brand that provides access to the token that you’re interested in
• Minimum Deposit – Minimum payment requirements can span from $1 to $1000. Beginners may want to opt for a provider with lower barriers to entry
• Apps & Software – Mobile traders should register with a broker that offers a top-rated iOS or Android application. If you prefer to trade crypto binary options on the go, then a mobile app is indispensable
• Deposits & Withdrawals – The best brokers allow crypto transfers alongside fiat debit cards, e-wallets, cheques and bank wires. Also, if you want to claim your profits as soon as possible, opt for a platform that processes payments promptly. Note, most crypto binary options brokers process withdrawals within 24 hours to a few working days
• Country Restrictions – Some crypto assets or brokers may be restricted in your region. At the same time, other countries ban crypto trading altogether. Use our list of trading platforms to sign up with a provider available in your jurisdiction

Select Your Crypto Asset

The best crypto binary options brokers tend to offer contracts on Bitcoin, Ethereum, Litecoin, Tether, Bitcoin Cash, Ethereum Classic, Iota and Ripple. As with all forms of trading, it’s best to trade the asset you have the greatest confidence with.

Decide Your Investment Amount

The more you invest, the more you can earn or lose. However, only trade with what you feel comfortable losing. A useful tip for beginners is to start small and then build up your position sizes as you become more comfortable.

Set An Expiration Time

When you open a crypto binary options contract, you will need to choose an expiry. When the trade reaches this point, you will either win or lose.

Expirations typically vary from 30 seconds up to a month, though even longer timeframes are available. With cryptocurrencies, you also have the advantage of 24/7 trading.

Predict The Market Direction

Here is where you put your strategy into action. A call option will pay when the value of the asset is above the strike price at maturity. A put option, in contrast, will pay if the price is below the strike price at expiry.

It’s important to do your homework before reaching this step. With this in mind, utilise technical and fundamental analysis to inform your trading decisions. See our guide to binary options trading strategies to aid price predictions.

Bottom Line

Crypto binary options trading can help beginners speculate on the price of popular coins without owning the underlying asset. This guide has run through the basics and tips for getting started. However, it’s also important to open an account with a broker that offers the best trading conditions, including mobile apps and competitive payouts.

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