Trading Bitcoin/USD with binary options
Getting involved with the most volatile digital currency might look easy and profitable but is also risky. Most of the binary options brokers will pay you 60-80% on a successful bitcoin trade depending on the expiry time and type of option.
How we trade at a bitcoin wallet?
My idea is to compare bitcoin trading offered by bitcoin wallets on one side and on the other - binary brokers’ bitcoin offer. Both could be very profitable, but which one of them is less risky?
You can buy bitcoins in exchange for US dollars or GB pounds at a random bitcoin wallets such as Coinbase and Bitbargain. First of all you need to sign up for an account at the chosen wallet and connect it with your bank account. Then you can start buying and selling bitcoins.
Currently 1 BTC = $588.72 and to get an idea about the digital currency volatility just check the chart below. In December 2013 the currency price nearly reached $1.200 but experienced a huge drop after Bank of China ban.
As a trader you need to buy cheap and sell expensive in order to make profit but you also have to consider the commission which you pay to the wallet platform. Storing your bitcoins at a wallet is safe but if the price goes down you have to make a decision. You can either sell your bitcoins with a loss or hold them and hope that the price will go up again.
You need to be very careful when you buy bitcoins and store them at your wallet because the price can drop at any time. There are also many critics of the digital currency claiming that it is not legitimate but simply a risky virtual commodity bet.
How to trade bitcoin at a binary options broker?
At a binary broker you can also trade bitcoin. You are not actually buying and selling the currency but only speculating on the Bitcoin/USD price. This fact can be taken as a huge advantage because actually you can profit no matter if the price goes up or down.
As you see on the example above the current market price is 585.46 and you have to predict the direction at expiry time. The payout is fixed to 70% so with a $1.000 trade your net profit may be $700.
A disadvantage is the short expiry time which often is just a few minutes and it is difficult to predict how the price will perform. For a lower payout of 60% you can find expiry time up to two months.
Binary brokers vs Bitcoin Wallets
In my opinion buying and selling bitcoins at a digital wallet brings higher risk for the trader considering the current price and the huge uncertainty in the industry.
For example 1 BTC = $588.72 => 5 bitcoins will cost you of around $2.945
When you have them at your wallet you need to wait for the bitcoin price to increase in value so that you can sell them in profit. You should also consider plan B if the price goes down with 50% - this exactly what happened in December 2013.
At binary options broker the risk is lower as you don’t have to buy the bitcoins. You are interested only in the movement of the market price.
You have the advantage of a fixed 60-80% payout for all successful trades. You can start with min trades as low as $25.
The disadvantages are: short expiry time and 100% loss on investment if your trade is out of the money.
I would recommend you trading bitcoins at binary options brokers because you need less money to start and the payout is fixed. You can profit even if the market price goes up or down.