Bitcoin Binary Options Trading
The virtual currency Bitcoin is turning into an accepted currency as it gains acceptance by the U.S Department of Justice as a “legal means of exchange” which gives it a green light to being an accepted currency for all financial exchanges.
Following this recognition, Bitcoin jumped to $744 on bitcoincharts.com, an exchange that trades Bitcoins for foreign currencies. Bitcoin, which was regarded with skepticism from many circles, now trades 45 times higher than at the beginning of the year. In the second half of 2013 it has quadrupled in value.
Yet another reason for this unprecedented surge is the limited supply of the Bitcoin. The recent closure of the Silk Road website which was used to trade illegal merchandise including drugs and guns has also done much to contribute to its validity. Now, with the ruling of US government agencies attesting to the virtues of the controversial currency, the road appears open to success.
What is the Bitcoin?
The Bitcoin was born in 2008, the brain child of a group of programmers who opened a site called Satoshi Nakamoto. Their idea was to create a virtual currency which could be used for all kinds of shopping on the internet, doing away with all the intermediary charges made by banks, brokers etc. There are reportedly 12 million Bitcoins being used today.
Bitcoin on the Market
According to Exante Ltd., which holds about 60.000 virtual Bitcoins, the price of the currency is outdoing the growth of the economy in the U.S. Colin Smith from Texas, is just one of the many ordinary people who bought Bitcoins earlier year. He says he’s hanging on to his 30 Bitcoins come what may. His view is shared by many but the question is how long can this demand go on. What is the price which will cause Bitcoin owners to exchange them for real currency? In other words, is this just another bubble, and if so, when will it burst?
Many holders of Bitcoins intend to hold on to them, but it remains to be seen how long this situation will continue. At present the demand is greater than the supply with around 30 bitcoin transactions per minute. Binary options brokers are among those offering the opportunity to get in on the action and trade bitcoin binary options.
Although those with Bitcoins are doubtless overjoyed at their luck, the very volatility of the currency is not to their advantage regarding the acquisition of goods and services. The situation resembles that of inflation in a country such as Argentina, where the peso is consistently losing in value compared to other international currencies.
In Binary options trading you buy CALL or PUT options on any asset offered by the broker. The option has a predefined payout that represents your winnings in case you prediction is correct. Ifyou believe an asset will gain value you buy CALL options, if you think the value will drop you buy PUT options.
Binary options have different expiration times that vary from 60 seconds up to one or two months. You know the potential payout and the potential loss from the moment you purchase the binary option, no matter how much the value of the asset will changes.
Bitcoin Binary Options Trading Example:
Let’s see how this works with Bitcoin binary options in this simple example:
Let’s say the Bitcoin is valued at $600 on MTGox and you decide to buy a CALL option that expires in one hour and has a payout of 80%.
You invest $100 in this option.
If the price of the Bitcoin is higher than $600 at the end of the the expiration time (one hour) you will receive a payout of $180 (that’s a profit of 80% in one hour).
If the price is lower you lose your investment ($100).
You will receive the same payout no matter how much the bitcoin price moves. It doesn’t matter if the prices moves to $610 or to $850, you get the same 80% payout. What makes binary options so unique compared to any other form of trading Bitcoins is that you are in full control of your costs and profit in 60 seconds.
U.S. Government Required Disclaimer – Commodity Futures Trading Commission. Trading financial instruments of any kind including options, futures and securities have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in these markets markets.
Don’t trade binary options with money you can’t afford to lose. Please visit the CFTC for more about binary option risks and fraud.