Binary vs Crypto - The Pros And Cons
Binary options and cryptocurrencies are popular choices when it comes to financial trading, both offering their unique features which hold different attractions to traders. While binary options are the more established of the two, it is fair to say that cryptocurrency trading has grown in popularity over more recent years.
It is important to recognise that when you trade in either, you are not owning the underlying asset but just trading on its price. This form of trading means that you never actually own the stock, you predict whether it will go up or down or reach a certain amount in a given time. Each come with their own set of benefits and of course, their pitfalls.
To ascertain the pros and cons of both of these trading methods and which suits you the best, we have put together this guide so that you can make an informed decision as to which suits you better and what you should be considering when choosing between binary options and crypto.
In this guide, you will learn:
- Any costs involved in each trading type
- Key differences and what will suit you
- The pros of cons of binary vs crypto trades
Trading Payouts And Losses
When considering whether to trade binary options or crypto, it is essential to understand the trade payouts and losses you can encounter. Which is going to make you the most money and with one which will you have the most success? While a good winning streak of short term options can produce good profits, a swing in an ever-fluctuating world of crypto can be even more profitable.
The opposite can be said of either though if the prices go against your trading. With binary options, you can expect anywhere between 60% and 90% returns depending on the broker that you choose. Then there are small transaction fees to consider. Any commission owed will be taken before you are paid out. With crypto, the payouts aren't entirely as predictable and can vary depending on some factors.
You should have respect for the volatility of the markets as when they fluctuate they can do so dramatically in a short space of time. It is also crucial to weigh up how much your transaction fees will affect your profits and your losses.
Buying crypto can prove quite expensive especially given that bitcoin reached $20,000 for one coin at its peak.
The Costs of Each Method
With cryptocurrency, you are speculating on the cost of the asset without actually owning it. Buying crypto can prove quite expensive especially given that bitcoin reached $20,000 for one coin at its peak, but trading in it is far less costly. There are however many fees to consider. To begin with, converting money into a Coinbase account carries a cost.
You can expect to pay $35 just as a transaction fee for entering the exchange. When you weigh up the cost of entry and exit, that's a cost of $70. A $100 trade, therefore, is going to cost you a lot. The same value in options doesn't carry the same level of fees. Binary options are subject to far lower transaction fees, and they are easier to avoid.
If you choose a broker that offers trading in your base currency, then this is a fee you can avoid. The crypto spreads can also mount up, and the more popular digital currencies can be costly to trade in. On a positive though, the only thing that affects the price is supply and demand. As a decentralised currency, no government or authority has control, and it is purely a global asset.
Which Trading Type Suits You
Binary options could be viewed as more popular than crypto because it is undoubtedly more established. Perhaps it is easier to understand and with more knowledge and experience available out there to help you learn how to improve your trading. Cryptocurrencies are more of an unknown quantity given that they are a relatively new concept. Variety with binary options may be considered to make it more appealing.
With assets like commodities, stocks, indices and currency pairs, you can trade on lots of different assets and build up quite a healthy portfolio. In addition to the variety of assets, there are also some diverse trade types – high/low, touch/no touch, ladder options, pairs and more. With short expiry times, you can make lots of trades in a short space of time.
With crypto, while there are a few different digital assets, it isn't quite as varied as binary. Trading depends on the sort of experience you are after. If you like the variety, then you may prefer binary; however, some people prefer the volatility of crypto and the fact that the fluctuating intraday prices can produce some healthy profits.
It's also not subject to the same influences as binary options – there are no external factors to consider, the currency is decentralised, and you aren't at the mercy of governments and authorities.
The Final Pros And Cons
Cryptocurrency is available globally and is a decentralised currency meaning that it has one value everywhere. There are no currency conversions or the like to be concerned about, and its traded around the clock. While this can be a good thing, the downside of this is that you can't be active while asleep and may miss out on some great opportunities.
With binary options, at least you know when you can trade. The crypto market is very volatile and subject to fluctuating rates which can swing quite a lot in a day. Higher predictability gives the savvy trader plenty of opportunities to make a large profit or equally to lose a lot. Not all brokers will offer every type of asset in either binary or crypto. In fact, with some, you will have a much greater choice than with others.
Many brokers that offer binary, CFDs, Forex and crypto trading may provide more of one type than the other depending on when they established and what they prefer. Some will dabble in crypto and specialise in binary options.
Jacob has been an author for us since our launch in 2012. He has over forty years’ experience in the financial sector and has held a variety of positions within financial services corporations and venture capitalist organisations. Learn more.