Crypto Binary Options: Getting Started

Author

Michael MacKenzie

Michael is a UK-based investment writer with over 10 years of experience in the journalism industry. Michael has critically evaluated many of the largest investment brokers in the UK.

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Editor

William Berg

William is an experienced investment writer with a history in forex trading software localization and IPO consultancy. He contributes as an author and fact-checker for established financial websites.

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Fact Checker

Tobias Robinson

Tobias is a UK director and partner at Investing.co.uk. He provides commentary on the financial markets in the UK and supports the testing team with first-hand observations from over two decades of active trading.

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Crypto binary options combine potential profits from a volatile digital asset class with the capped risk of an all-or-nothing trading vehicle.

This guide to trading crypto binaries for beginners explains how these contracts work, the pros and cons, plus the best brokers for this style of trading.

What Is A Crypto Binary Option?

Crypto binary options are a type of binary option contract where the underlying asset traded upon is a cryptocurrency, such as Bitcoin.

Binary options are a form of fixed-odds financial betting that leaves traders with only two possible outcomes. For example, will the price of Bitcoin be above or below £100,000 by the end of the trading day?

Cryptos are particularly popular among those investing with binary options because they can capitalise on the significant volatility of digital currencies.

However, due to their rapid price swings they are also high risk – you could lose any money you invest.

How Trading Crypto Binary Options Works

The premise is simple – investors speculate on the future price of a cryptocurrency. Normally, traders bet on a crypto’s value either rising or falling beyond a set strike price by an agreed expiry time.

If the prediction is fulfilled by expiry, they earn a profit, and if not, they lose their stake. It’s a simple win-or-lose scenario.

Example

Let’s say I bet £100 on a crypto coin’s price falling below its current market value of £20,000 in five minutes. The broker offers a 50% payout.

Potential outcomes:

• If I am correct, I receive £150 (£100 stake + £50 payout)
• If I am incorrect, I lose my initial stake (£100)

Contracts

Several types of crypto binary options contracts exist which can alter trading parameters:

• Over/Under – The standard crypto binary options contract, also known as High/Low or Up/Down. You bet on whether a crypto’s value will be higher or lower than the current market price at the expiry.
• Touch/No Touch – Traders bet upon a cryptocurrency’s potential to reach a pre-determined value, set either higher or lower than its current market price. The payout is received as soon as the ‘touch’ takes place.
• Boundary – A position is made on whether a crypto’s value will arrive inside or outside an agreed price range upon expiry. These contracts are also known as Range and In/Out options.
• Ladder – Standard binary options but with several strike prices staggered high and low in value. Depending on your bet’s direction, the further a crypto’s price moves, the more price levels you conquer and the higher the returns.

Pros of Trading Crypto Binaries

Cons of Trading Crypto Binaries

Getting Started

1. Choose a Broker

See our list of top crypto binary platforms and use our guide below for the lowdown on choosing the right provider for you.

2. Study the Market

Check online which coins are becoming popular, analyse historic price movements and investigate potential trends such as celebrity endorsements that can trigger surges in prices.

3. Decide How Much to Stake

The more you invest, the more you stand to earn. However, the larger the stake the greater the loss. With that in mind, only bet what you are willing to lose.

A helpful tip for beginners is to start small and gradually increase your position sizes. Some investors recommend only risking up to 1% of your investment pot in a single trade.

4. Set the Expiration

When you open a crypto binary options contract, you will need to choose an expiry time. Some bets will have a one-minute expiry while others could last weeks.

5. Place Your Bet

Simple contracts will involve a high option, which succeeds when the value of the asset is above the strike price at maturity, and a low option, which succeeds if the price is below the strike price at expiry.

How To Choose a Binary Broker With Crypto

Over years trading binary options, and reviewing brokers, our experts have found that these are consistently the most important factors when choosing who to sign up with:

Trust

Crypto binary options are banned in the UK for retail investors, so you won’t have cover from the Financial Conduct Authority (FCA).

That means you’re likely to be trading with an unregulated or weakly licensed firm overseas, and there’s no obvious stamp of approval for a reliable broker, so its especially important for you to carefully research any broker before you sign up.

You should look for one that’s been in the business for years serving tens, if not hundreds of thousands of clients.

Check industry and user reviews, and research a brand for reports of scams or fraudulent behaviour before you stake your hard-earned cash.

Platform

Trading crypto binary options is simple in theory, but far more complex in practice, and you’ll need a finely tuned charting platform to have the best chance at success.

Unlike other investment vehicles, crypto binary options hinge on a simple yes/no question of whether an asset’s price will end up above or below a strike price when the contract ends.

Your platform needs to reflect that, and should show the strike price, contract length and stake prominently alongside the chart showing the price movement.

Turbo crypto binary options contracts can expire in as little as five seconds, so we especially favour platforms with a seamless, lag-free real-time chart of price movements.

Some of our favourite platforms come with in-built tools such as technical indicators, research tools and social trading, which can be especially useful when trading crypto markets that move heavily due to hype and community activism.

Pocket Option’s user-friendly platform

Assets

You should look for a crypto binary options broker with a good range of established crypto tokens like Bitcoin and Ethereum at the minimum.

You should also look for a broker with newer tokens and altcoins, as the high volatility can be useful for some binary options trading styles and strategies.

Generally, crypto binary options contracts are traded in pairs with USD, but you might also be interested in crypto/crypto pairs such as ETH/BTC.

Expiry Times

The expiry time on your crypto binary options contract – in other words, the length of the contract – has a huge impact on the way you trade, so you should look for a broker with contracts that suit your style.

We’ve found that many binary brokers focus mostly on short-term trades of an hour or less, and sub-one-minute turbo contracts, but longer interday trades are also possible with some brokers offering one-month contracts and even longer.

Turbo contracts can be great fun, but once you get to really short time frames under a minute you should be aware that analysis won’t cut through the fuzz and a lot of the time your results will come down to luck.

I generally prefer longer contract lengths for this reason.

Michael MacKenzie

Author

Payouts

The payout is among most important factors determining whether you profit in the long run from crypto binary options, so you need a broker with payouts as close to 100% of your stake as you can find.

Crypto binary options usually hinge on a simple 50/50 question – will BTC or another token’s price be higher or lower than the strike price after a given period of time.

Brokers earn their money from these derivatives by tipping the scales in their favour – paying out only a percentage of your stake in a successful trade, but keeping the whole amount in a trade that goes bad.

Many brokers give poorer payouts on cryptocurrencies due to the volatility, but you can find payouts of 80% or more.

Bottom Line

For aspiring investors with a high risk tolerance and a preference for simple and fast-paced derivatives trading, crypto binary options could be an attractive route.

They offer upfront risk and traders do not take ownership of the underlying token. They also offer straightforward access to an emerging market that promises significant price volatility.

Choose from our recommended crypto binary firms to start trading today.

FAQs

Are Crypto Binary Options Suitable For Beginners?

The win or lose outcome of binary options is easy to understand and their capped risk means new traders can only lose their initial stake. This makes cryptocurrency binary options popular with aspiring investors.

However, cryptos are a notoriously volatile market and most retail traders lose money, so new traders should go in with their eyes wide open to the risks.

Can I Trade Crypto Binary Options If They’re Banned In The UK?

Although the FCA banned binary options trading in 2019, UK traders can still register with offshore brands. This means British traders must choose a crypto binary options broker where UK clients are accepted.

But it’s important to note you may not receive any legal protections.