Digital options based on crypto currency is getting increasingly popular, but why? Below, we will look at a few reasons behind the increased trader interest in crypto-based binary options.
Why is crypto-based digital options trading becoming popular?
Gain exposure to cryptocurrency without actually owning cryptocurrency
Digital options is a very easy and convenient way of gaining exposure to cryptocurrency prices without actually buying, owning and selling cryptocurrency. You do not need to get a crypto currency wallet or even register at a dedicated crypto currency online market place – just use a standard digital options site.
Clear expectations
For many traders, one of the main appeals with digital options is the clarity and predictability. You can only make a profit or loose the money – there is no room in between. You know exactly how much you will lose if the option expires out-of-the-money and exactly what you will get paid if the option expires in-the-money.
Now, this general aspect of digital options have begun to attract traders looking to gain exposure to the crypto currency market in a way that is more predictable than actually investing outright in crypto currency, i.e. buying, owning and then trying to sell crypto coins at the right moment.
The crypto market is always open
We have listed several reasons why people who are interested in cryptocurrencies chose the digital options route to gain exposure instead of actually buying cryptocurrency outright. But what about the traders who already have extensive experience with digital options, but for more conventional underlying asset such as stocks and foreign currency pairs? Yes, there is diffidently a movement from that direction as well, as experienced digital options traders start realizing the benefits of having cryptocurrency as the underlying asset for a digital option.
Cryptocurrencies are known to be volatile, which is a benefit for traders who knows how to make money on stormy markets with a lot of movements. For the most established cryptocurrencies, such as Bitcoin, there is even a situation where the market is both high-volume and high-volatility at the same time, a very special combo that has proven to be very appealing to certain trader segments.
Another benefit is the 24/7 activity. On most digital option trading sites, the trading hours for the underlying asset dictate when the digital options trading is available. Therefore, someone doing digital options trading based on shares listed on the New York Stock Exchange can only actively trade during NYSE trading hours, and so on. Digital options based on foreign currency are typically not available during parts of the weekend, and so on. Digital options traders who are unhappy with these limitations are now beginning to look at crypto currency digital options, since the crypto currency market never closes and crypto-based digital options are available for trading 24/7 and even during major holidays.
Examples of large cryptocurrencies (by market cap)
In general, you are more likely to find digital options based on fairly well-established crypto currencies with a large market cap. If you want something more exotic, you might still find it, but you will have fewer brokers to chose from.
Here are a few examples of crypto currencies with a large market capitalization (as of September 2022).
Bitcoin (BTC)
At the time of writing, the market capitalization for Bitcoin exceeds 365 billion USD and one single bitcoin coin costs over 19,000 USD. Bitcoin was the first block-chain based cryptocurrency and it is by far the most well-known. It was established in 2009/2010 and helped pave the way for the era of block-chain based cryptocurrencies.
Ether (ETH)
Ether is the native coin of the Ethereum platform. It is less well-known than Bitcoin, and the price of 1 ETH is currently around 1,300 USD. Still, the market cap exceeds 160 million USD.
Tether (USDT)
Tether is allegedly anchored to the United States Dollar and is thus trading at 1 USD per coin. It is one of several so-called stable coins that has been launched in recent years. The market cap is 68 billion USD. Being a stable coin, it is of limited interest to most retail crypto speculators, but some traders use it as a “safe haven” when they want to exit a crypto currency position without converting back to actual USD. If you are using digital options instead, you don´t have to worry about such conversions since you never own any actual crypto currency.
XRP (XRP)
Formerly known as Ripple, this crypto currency was launched in 2012 and now has a market capitalization of roughly 22 billion USD. The price of 1 XRP is, at the time of writing, hovering around 0.43 USD.