Options & Binary Options - The Case for BitCoins

The idea of bitcoin has grabbed attention of people since its foundation in 2009. It was termed a novel and genius innovation by, and others viewed it with caution and largely ignored it. As was the case with ideas such as Linux, which was often rejected by the gurus of operating platforms and later became a success that contributes to computing in magnanimous way, bitcoin suffered the same ignorance to catch immense value later on.

In quintessence, this crypto-currency as it is popularly called as, is a digital currency. It is not mandated through a central authority of any country. Rather it is run through a central system composing of complex algorithms, programs and network of computing power. Its regulations are rather the mathematical in nature; they restrict the currency’s supply, whereas the associated systems, which link its exchange over the internet, manipulate its demand.

Over the period, the value of bitcoin has fluctuated and behaved in manners similar to other currencies. Initially, when it was not an acknowledged means of exchange, the bitcoins required to buy a simple item would run in thousands. However, gradually its value strengthened as the people started to rely on its operations, got aware of its features and benefits, and leading commentators paid some attention to its creeping success. Today, one bitcoin is worth more than $800.

Referring back to behavior of bitcoin’s value it is pertinent to keep in mind that when US officials presented slightly positive remarks in their senate hearings, the bitcoin surged in value. Similarly, when the US government banned a major bitcoin exchanging website, its value responded by a slight decrease. Bitcoin’s value also plummeted when Chinese authorities banned its use. The value of bitcoin still recovered, and showed all one important thing; it has gained a momentum that will not go away soon.

Keeping in to perspective the above-mentioned details about this crypto-currency it was about time that a new option featuring bitcoin came in to existence. So far, quite a few online vanilla options and binary options brokers have started to offer pairs that trade with bitcoin versus any other currency. The bitcoin has an exchange value against the leading currencies such as USD, GBP, and EUR. All these dynamics, particularly the fluctuation in the value of bitcoin, make it an ideal candidate to trade as an option.

However, there may lay certain structural problems with this instrument. We do know that bitcoins are issued limited in numbers, hence opening vanilla contract that offers the right to sell or purchase bitcoins against any other currency and a corresponding obligation to deliver on the exchange may not be a viable thing to do. The supply of bitcoins is highly inelastic.

Binary options on the other hand seem a better alternative, as here the trader merely trades the anticipation in relative values of a pair, which is settled in a broad based currency, with inherently no obligation to deliver any asset. Therefore, to the excitement of veteran traders, we can reasonably expect this segment of binary options market to surge, improvise, and evolve in the next few months.