If you want to use the internet to try your luck, you have many options. For example, you can play different games as a member of a casino PL site. But if you want to both try your luck and make an investment, you can try crypto trading like many others.
Buying and selling cryptocurrencies is something millions of people around the world do, but there are some exotic options in this market as well. “Binary options trading” is one of them: it’s easy to learn, highly lucrative and doesn’t require a big budget to get started. But if you don’t know enough about it, you may be taking a big risk. Below, we share the most important things you need to know about crypto binary options trading to minimize this risk.
What is binary options trading?
“Binary option” is not something specific to cryptocurrencies. This is known as “exotic financial betting” and means trying your luck for changes in the value of a particular asset. Whether they are a financial tool or gambling has long been debated. Binary options trading is prohibited in the European Union by the decision of The European Securities and Markets Authority (ESMA). The Australian Securities and Investments Commission (ASIC) also banned them in 2021. In the United States, they are only available on a very limited basis, and the FBI continues to publish regular reports of the “binary options trading scam.”
The biggest reason for these bans is that binary options trading can cause ordinary investors to go bankrupt very easily, especially if they don’t have any self-control. Binary trading offers a lot of earning potential, but the potential for loss is also very high. Many investors start doing it without even knowing exactly what they are risking, and the result is almost always a disappointment. However, binary options trading is just another investment option: it can be extremely profitable if you use it correctly.
“Binary” is a term meaning “double”. The binary option offers exactly this: you make either “yes” or “no” bids about the value of a particular asset. Let’s assume that this asset is Bitcoin. Binary options trading gives you two options about the value of Bitcoin on a given date:
- Yes: The value of Bitcoin will exceed a specified value on the specified date.
- No: The value of Bitcoin will be below a determined value on the specified date.
You can make an investment in any of these options. If you lose, you gain nothing and lose your investment; this is called “out of the money”. If you win, it’s called “in the money,” and both your investment and the profit offered for that option are paid out. In this case, how much you can earn depends on the risk you take and the rates offered for that option. Let’s try to explain with an example:
- Let’s assume that at 13:21 on 29/09/2022, the value of Bitcoin is 100 USD.
- After 30 minutes, that is, at 13:51, a binary option (yes or no) opens on whether this value will fall below 100 USD. A 70% payout is offered for both options.
- Let’s say you deposit $100 in “Yes”. If at 13:51 the Bitcoin value still has not fallen below 100 USD, you will earn 170 USD (100 USD investment + 70 USD payout). However, if the value of Bitcoin is $99.99 (or less) at that time, you will lose $100 and gain nothing.
Note that it doesn’t matter what the actual value is. So, for example, you do not say that the value of Bitcoin will be 102.35 USD exactly. You’re just saying that it will be above or below a certain value; the value itself doesn’t matter. In this respect, we can say that it is almost the same as over/under bet in sports betting.
Where to trade crypto binary options?
Forex sites offer this option, but you can also find it on some crypto exchanges. However, as we mentioned above, it is not possible to find a licensed institution that offers crypto binary options trading in the European Union, Australia, and United States. (You can find it in the United States, but your options will be very limited.) So, you have to use Forex/exchange sites known as “offshore”. We cannot recommend a specific site: you should do your own research. However, it is imperative that you choose platforms that have a good reputation, are audited and secure.
What can you “bet” in binary options trading?
Once you find such a platform and become a member, you will be presented with different options for trading, such as:
- Up/Down: This is another name for the “yes” or “no” options we explained above. This is the most basic and simplest method available for trading.
- In/Out: This option is like up/down, but a specific value range is used instead of a fixed value.
- Ladder: Bids with multiple up/down or in/out options. Each of them pays a different amount depending on the level of risk, and it is possible to try your luck for more than one offer at the same time.
Crypto binary options trading can be quite profitable, but don’t be swayed by the high earning potential: like any other investment, it should be used responsibly.