In the year 2008, two major innovations entered the world and changed how we looked at finance. One of these was the binary options trading industry and the other was an online currency called bitcoin.
What is Bitcoin?
Bitcoin is simply a digital currency. There is no physical entity of bitcoin, but rather balances that exist on a public ledger that is encrypted with both private and public keys. Bitcoin was created as a way to facilitate online payments without using a centralized authority. The decentralized nature and the anonymity offered by bitcoins have made this form of currency quite popular.
What is Binary Options Trading?
Binary options trading involves a yes/no trading platform designed to have a payout of a fixed amount. Simply put, a trader in the binary options market will decide whether a certain asset will go up or down in price over a fixed amount of time.
Bitcoin Binary Options Trading
Some innovative brokers have sensed a new opportunity in the trading market and have come up with different ways to trade binary options using bitcoins. Essentially, there are two ways that bitcoins can be traded on the binary options market. The first way is to use bitcoins as the medium of exchange. The second way is to use bitcoins as the underlying asset.
To use bitcoins as a medium of exchange a trader will trade the various underlying assets of the financial market using bitcoins. For example, a person may trade the Euro/USD currency pair and call for it to rise or fall during the specified time frame. If the trade is successful instead of being paid in a standard currency such as the Euro or U.S. dollar they will be paid in bitcoins.
The other option for trading bitcoins is for it to be used as an underlying asset. Bitcoins are traded on specialized exchanges and just like the euro or the U.S. dollar the exchange rate for bitcoins goes up and down in accordance for the demand for them.
For example, in the year 2013 the Cyprus banking crisis led to many losing confidence in the Euro. This led to many investors switching their wealth from the Euro to Bitcoins. During this time the sudden demand for bitcoins pushed its value up so that it was almost equal to the price of gold. The volatility of bitcoins is what lead to many binary options brokers offering binary options contracts tied to the value of bitcoins. To put it simply, bitcoins can be traded just like any other type of underlying asset that is listed on a binary options brokers’ platform.
Why Use Bitcoins?
Many people may be wondering why they should consider being paid with bitcoins for their binary options trades. One of the biggest benefits of bitcoins is that the cost of the transaction will be lower than any other form of online payment. Another reason to consider bitcoin is because it allows you to earn extra bitcoins. Since bitcoins are traded and the value fluctuates based on demand, as a trader you can shield yourself from these fluctuations by earning more through the profits earned during your trading.