Bitcoin Binary Options

Having gained traction amongst budding crypto investors and professional traders alike, Bitcoin binary options integrate two equally contemporary financial products; a derivative method of trading where investors speculate on the future price of a digital asset over a certain timeframe, reliant on two outcomes.

This guide to BTC binary options trading explains how it works, different products and trading strategies, plus the pros and cons. We also list the best Bitcoin binary options trading platforms in 2024 to help you get started.

Bitcoin Explained

The pioneer of its industry, Bitcoin (BTC) is the largest and most traded cryptocurrency in the world, demonstrating its resilience, even in an unstable market and given its volatility.

Bitcoin is a type of digital currency – or cryptocurrency – representing a store of value, such as gold, which can be used as an asset. This value is created through Bitcoin mining, a process where complex algorithms are used to make new coins. Although the environmental implications are controversial for some, it validates and secures all Bitcoin transactions.

In essence, Bitcoin’s USP is its independence from bank or government control; enabled by its blockchain computerised ledger system which stores each Bitcoin transaction as a string of data.

Since its launch in 2009, Bitcoin’s value has experienced turbulence with frequent upsurges and crashes. For example, Bitcoin rose from $6,965.72 to $29,000 between January and December 2020, observing a 416% increase, while in mid-2021, as Bitcoin hit record prices over $60,000, it slumped by 50% falling to $29,796 (July 2021). Yet, despite a decline in early 2022, Goldman Sachs analyst Zach Pandl predicted that Bitcoin would continue to take a larger market share from gold.

How Bitcoin Binary Options Work

With Bitcoin binary options, the speculated underlying asset is the value of BTC. Essentially, the Bitcoin and binary options trade relies on a simple win or lose bet. Investors deposit their initial stake with their broker; the maximum they stand to lose. Then they predict whether Bitcoin’s price will rise or fall by the expiry time.

If their prediction is wrong, the platform will keep the investor’s deposit. If correct they receive a payout, including their deposit and a predetermined sum. Correct speculations expire ‘in the money’ and incorrect ones expire ‘out of the money’, referring to the relationship between the predicted price and the current value of Bitcoin, which causes a binary option to have intrinsic value or not.

The fixed-odds nature of binary options puts a cap on losses but also returns, while the straightforward win or lose design and fixed returns and losses make binary options with Bitcoin an easy entry into trading.

List of Bitcoin binary options brokers

Expiry times in Bitcoin binary options trading range from a matter of seconds to a whole day, but the currency’s volatility makes it an unpredictable asset to trade, especially under shorter timeframes.

However, lucrative returns are achievable if traders can anticipate market changes, as identified by Shane Neagle in Finance Monthly: “Bitcoin binary options are best used when a trader is confident about the direction of Bitcoin’s price.”

Example Trade

Let’s say a trader thinks Bitcoin’s price will exceed $50,000 by midday. They buy a Bitcoin binary option with a fifteen-minute expiry and bet $100. Their broker offers them a payout of 70%.

At 12:00 PM, within the expiry time, their prediction is realized and the broker issues their $170 payout ($100 deposit plus $70 profit).

Now, in this scenario an opposing trader may incur a loss as their contradicting bet is not realized and expires out of the money.

Bitcoin Binary Option Products

When considering how to trade Bitcoin binary options, first think about the type of product you want to use. The top online brokers offer several different contract types which can inform your trading strategy:

Up/Down – The simplest contract, investors speculate whether Bitcoin’s value will be higher or lower than the current market price at the expiry. This is the classic call/put option, also known as High/Low or Over/Under.
Touch/No Touch – Traders speculate whether Bitcoin’s price will reach a pre-determined value, set either higher or lower than the current price. For Touch binary options the trader believes the predicted price will be reached, and in No Touch options, they believe it won’t. With Touch options, the payout is received once the ‘touch’ takes place, regardless of expiry.
Boundary – As its name suggests, a bet is made on whether Bitcoin’s value will arrive inside or outside an agreed price range on expiry. Boundary options are also known as Range and In/Out.
Ladder – Like the Up/Down product, Ladders have several strike prices staggered high and low in value. Depending on the direction of your bet, the further the price moves the more levels you hit. This contract suits Bitcoin traders as it requires significant price moves and can provide more lucrative returns than other contracts.
Short-term – This contract type follows the Up/Down formula but has shorter expiration timeframes, for example, 30-seconds, 60-seconds, 2-minutes and 5-minutes. This is popular as investors can realize speedy payouts, but it requires strong intuition and fast reactions to market fluctuations.

Trading Strategies

It is important to have a strategy for Bitcoin binary options trading as disciplined and thoughtful moves increase the likelihood of profits. These initial actions could increase your chances of success:

Demo Accounts – Opening a demo account first is useful to practise trading, especially for an asset as volatile as Bitcoin. Allowing traders to compare strategies and demo accounts also signals a trustworthy broker.
Trade Signals – Understanding the basics of market signals is key. Beginners to binary options trading with Bitcoin may want to monitor market movements using trading graphs and stay updated on news, to help decide when to place a bet.
Investment Amount – Considering your investment amount is equally important to creating profits. Sensibly managing funds and investing 1% or 2% of your portfolio is best to prevent big losses. This tactic is shared by many Bitcoin binary options enthusiasts.
Trading Strategies – For a Bitcoin binary options investment, a strong trading strategy is essential. Investors should secure a significant winning streak to turn profits – for example, winning 60% of their bets with payouts of 70%.

Popular BTC binary options strategies, based on research and chart analysis, include:

Trend Strategy

Ideal for newcomers, traders straightforwardly analyze the overall up/ down trends of Bitcoin to inform their binary options trade. This involves studying trading charts to understand the patterns of movements which can allow you to make confident predictions. This can be less useful for short-term Bitcoin binary options as traders are exposed to brief fluctuations rather than the overall price direction.

The top Bitcoin binary options brokers offer interactive charting with analysis tools to help this strategy.

Candlestick Strategy

Pioneered by Steve Nison in 1991, the candlestick strategy involves traders reading asset charts, in this case Bitcoin, to inform their prediction. Once a trader can interpret specific patterns, predicting price moves is easier.

This strategy centres on the candlestick formation where a pattern is formed by the price going up and down in succession, shaping into a candlestick. The top line is known as the mountain and the bottom line is the valley. However, success with this strategy requires extensive observation of trading charts and price patterns.

Money Flow Index Strategy

This Bitcoin binary options strategy is best used in the short-term – for example, a duration of five minutes. It involves traders studying the demand and supply of the asset, in this case Bitcoin, to capitalize on immediate price movements. Demand and supply are the main factors which alter an asset’s price in shorter periods.

Using the MFI (Money Flow Index) Indicator, which displays the ratio of buying to selling on a scale of 0-100, traders can estimate Bitcoin’s price movement by understanding the demand and the supply.

Cryptocurrency binary options brokers

Pros & Cons of Trading Bitcoin Binary options

Pros

24/7 Trading – The digital nature of crypto means that most platforms which offer binary options on Bitcoin have 24 hours a day trading, meaning investors are not limited as to when they can trade.
Transparent Risks and Rewards – BTC binary options by design present the upfront fixed payout and loss prior to a transaction being made. This means traders always know what they stand to lose or gain.
Straightforward Proposition Trading – The basic win or lose outcomes when trading Bitcoin binary options removes more complicated considerations for traders, for example, selling. Their simple structure makes them an appealing starting point for aspiring crypto investors.

Cons

Scam Risk – Fraudulent Bitcoin binary options brokers have become mainstream online, making it easier for investors to succumb to possible scams as it’s harder to navigate between trustworthy and untrustworthy Bitcoin binary option trading platforms.
High Volatility – The extreme volatility of Bitcoin’s value in the crypto market means that any investment or trade is high risk. Speaking on Bitcoin’s volatility, money-saving expert Martin Lewis warned, “You can make a fortune, but you may lose a fortune.”
Lack of Trading Tools – Being a relatively recent phenomenon, binary options brokers that accept Bitcoin often have limited trading tools available to investors. This means BTC binary options may require experienced traders or those with a good understanding of digital currency markets.

Comparing Bitcoin Binary Options Brokers

It is worth selecting a binary options broker that accepts Bitcoin as an underlying asset. Some of the top supporting brokers and platforms include:

Quotex

Regulated by IFMRRC
Allows international clients
Makes payouts of up to 95%
Accepts a $10 minimum deposit
$10,000 demo account available
No leveraged trading, preventing losses for beginners
Large selection of technical tools and trading charts available, with 24/7 support
No withdrawal fees and low commission, with a minimum Bitcoin withdrawal of $50

Pocket Option

Regulated by IFMRRC
Allows international clients
Demo account available
Makes payouts of up to 90%
Accepts a $50 minimum deposit
No withdrawal or commission fees
Technical tools and trading charts available
Supported by banks around the world, with a surcharge in Asia
High leverage, offering up to 1000x for Bitcoin (increasing risk for investors)

IQ Option

Regulated by CySEC
Makes payouts up to 94%
Demo account available
Accepts a $10 minimum deposit
Credit card transfers incur large fees
Low withdrawal fees and 3% commission fees on certain leveraged crypto options
Offers 2x leverage on Bitcoin, doubling returns and losses (maximum is 500x)
Easy to navigate platform, with technical tools and 24/7 support

Spectre.ai

No withdrawal fees
Demo account available
Makes payouts of up to 90%
Not available to UK and US clients
Accepts a $10 minimum deposit
Regulated in St. Vincent and the Grenadines
No leveraged trading for Bitcoin binary options
Fast transactions enabled by decentralized autonomous liquidity pool (DALP)
Limited educational resources but has extra features like U-Token Rewards and Spectre Incentive Program which offer bonuses and higher payouts

BD Swiss

Demo account available
Offers up to 500x leverage
Not available to US citizens
Accepts a $10 minimum deposit
Payouts vary dependent on leverage
Access to trading charts and technical tools
Regulated by CySEC and has a Financial Services Authority Seychelles License
No withdrawal or deposit fees on credit card transactions, 10% account deduction monthly after 90 days idle

Note, the Bitcoin sphere is notorious for online scams and dishonest crypto brokers. Check your chosen broker is regulated by looking for membership with an international regulator like the CySEC, ASIC or IFMRRC. Also read platform reviews before registering for an account. Finally, watch out for Bitcoin binary options brokers offering huge returns and bonuses with low risks – they are usually too good to be true. Educational tools and demo accounts are often indicators of reliable brokers.

Final Word On Trading Bitcoin Binary Options

Bitcoin binary options are an intriguing addition to trading portfolios, providing straightforward investing accessible to even the most novice trader. Their fixed-odds design means risks and rewards are known upfront and, alongside a well-developed strategy, BTC binary options trades can reap profits. Even so, investors should remain cautious of scams and Bitcoin’s volatility.

FAQ

How Safe Is Trading Bitcoin Binary Options?

The Bitcoin and binary options trading space is high risk. The market is extremely volatile and numerous fraudulent binary options brokers can be found online. Checking a broker for registration status and extra services like demo accounts can protect your funds and prevent scams. We recommend investors carefully survey their current finances and keep a realistic approach to money management before investing in Bitcoin binary options.

Are Binary Options Only Available In Bitcoin?

No – several binary options brokers accept Bitcoin and other cryptocurrencies, like Ethereum, for example, Quotex and Pocket Option. Check your broker’s offerings to better understand how to trade Bitcoin binary options and explore more cryptocurrencies.

Can Bitcoin Binary Options Be Closed Early?

Bitcoin binary options automatically close at expiry but you can close your positions early on some trading platforms. For certain products, once the strike price is reached, the option closes before expiry. Keep in mind that early exits may limit potential returns.

Where Can I Trade Bitcoin Binary Options?

The legality of Bitcoin varies significantly between countries. In 2021, El Salvador and Cuba accepted Bitcoin as legal tender, but China made all types of crypto trading illegal. Other countries, such as the UK, restrict the types of trading allowed in Bitcoin. If your country has restrictions on Bitcoin, use a binary options broker abroad where there are fewer limits, like Australia and Japan. Be aware though that this may result in limited legal protection.

What Are The Fees Like For Bitcoin Binary Options?

Fees for binary options in Bitcoin vary between brokers. Many, like BDSwiss, offer low entry fees from $5 or $10. However be wary of additional charges for account inactivity and deposit or withdrawal fees, which can accumulate over time. The best option is always to choose a broker with a transparent fee structure.