A (Perhaps) Better Way to Trade Bitcoin

A (Perhaps) Better Way to Trade Bitcoin

In late 2014 Nadex received CFTC approval to offer the first exchange-traded derivatives on the price of Bitcoin. For the first time, traders could trade the price action of Bitcoin, without having to mine or hold actual bitcoins. 

As Bitcoin surges, so has the interest among traders. Some are looking for new, liquid markets in which to put their risk capital. Others are beginning to see Bitcoin and the blockchain technology behind it as a possible new safe haven, a refuge from markets whose price movement seems emotional and unpredictable.

The Brexit vote appears to have boosted interest in Bitcoin, Ethereum, and other digital currencies. Steeped as it is in issues of national identity and economic inequality, the upcoming Brexit referendum is a classic example of emotion driving markets. It may not be a coincidence that Bitcoin and ether are at long-term and all-time highs.

At Nadex, we anticipated the rise of Bitcoin and in late 2014 received CFTC approval to offer the first exchange-traded derivatives on the price of Bitcoin. For the first time, traders could trade the price action of Bitcoin, without having to mine or hold actual bitcoins. The derivatives are cash-settled upon expiration—no currency exchange needed.

Even better, the derivatives in question are limited-risk binary options, traded on the oldest and largest CFTC-regulated exchange of its kind, Nadex. For less than $100, a trader can take a long or short position on the price of Bitcoin, risking no more than whatever he or she paid to enter the trade. With low fees and no brokers needed, Nadex has brought Bitcoin out of the realm of the exotic and made it affordable and accessible to anyone.

You can even trade Bitcoin binaries on your phone or tablet. At Nadex, part of our mission is to democratize access to the markets.

For businesspeople who aren’t traders, Bitcoin is still important to learn about. Businesses of all kinds are accepting Bitcoin payments. Blockchain, the technology that makes a decentralized, peer-to-peer digital currency something people can trust, may be one of the great innovations in finance of the past decade.

We’d like to think exchange-traded binary options are another. Nadex emerged after the 2008 financial crisis (as did Bitcoin) to offer a way to participate in the markets with less risk and greater transparency. For now we’ll just say that Nadex Bitcoin binary options are a simple, easily accessible way to experience this new market.

Trading a market is a great way to learn about it. Analysts who have never put money on the line don’t always know the role emotion plays, for example, in a selloff just below a high or an outsized reaction to a news event.

Besides Bitcoin, you can trade Nadex binary options on the most popular currency pairs, the world’s largest stock indexes, and commodities like crude oil and gold. So if you want to see how two markets behave under the same circumstances, you can trade them side-by-side and see.

Wondering if Bitcoin really is an alternative safe haven to gold and the yen? Trade binary options on all three and compare. Expecting a positive or negative correlation between the FTSE, the pound, and Bitcoin? Take long or short positions in all of those markets from one account.

You can only do that on Nadex, with guaranteed risk limits and the security of a regulated exchange. It’s a great way for analysts, economists, and students to deepen their understanding.

If ever a market was susceptible to mood swings, it’s Bitcoin and the other new blockchain-based digital currencies. Some may find it ironic that a technology designed to foster trust and stability should get such a skeptical and volatile reception. But that’s often how disrupters are welcomed. At Nadex, we learned that in our early years as well.

Nevertheless, blockchain has gone from a fad to a factor and indeed, a force in banking and trading. Exchange-traded binary options have similarly gone mainstream. Even the NYSE has joined in with its new ByRDSM contracts. For those who want to explore this new world, Nadex offers a way to do it on a CFTC-regulated exchange with a small capital investment, accurate and transparent pricing, and limited risk guaranteed.

Bitcoin binary options from Nadex: one good disruptive innovation deserves another. 

This information has been prepared by Nadex, a trading name of North American Derivatives Exchange, Inc., prepared by independent third parties contracted by Nadex or reproduced form third party news agencies. In addition to the disclaimer below, the material on this page does not contain an offer of, or solicitation for, a transaction in any financial instrument. Nadex accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication.