Crypto.com may not offer certain products, features and/or services on the Crypto.com App in certain jurisdictions due to potential or actual regulatory restrictions. Your gains from this trade — minus any exchange fees — will be $5,000. This is because you originally received $35,000 from the sale of the borrowed BTC and spent $30,000 repurchasing it to repay the debt. Next, we’ll explain the mechanics of shorting with easy-to-follow examples and also introduce some advanced techniques traders use to earn extra gains from BTC downturns.
Therefore, it’s crucial to conduct thorough research, use risk management strategies, and only invest what you can afford to lose when shorting Bitcoin and other cryptocurrencies. Another popular trading platform among short traders is KuCoin, which is considered one of the best crypto exchanges in general, not just in terms of short trading. It offers margin trading options with up to 10x leverage for isolated margin accounts. The process of short-selling crypto on KuCoin is virtually the same as on Binance, so you can check the guide above for more information.
To profitably engage in shorting crypto, you will need to learn how to effectively analyze the market using both fundamental and technical approaches. Then you must learn how to manage your risk exposure using stop losses while taking profits at appropriate levels. Another way to bet against the price of Bitcoin is to spot sell Bitcoin and wait for the price to drop before buying it again. This is probably the easiest way to short BTC, but many investors avoid the trading strategy due to the requirement of parting ways physical Bitcoin. Futures trading is a more sophisticated way to short Bitcoin than margin trading, but it can also be more risky. This is because you are not actually buying or selling Bitcoin, but rather a contract that represents the price of Bitcoin.
Ways to Short Bitcoin [Ultimate Guide To Shorting Crypto]
Until recently, there weren’t many reputable trading platforms you could do this through. However, the Chicago Mercantile Exchange (CME), Nasdaq, and most recently CBOE all announced that they’re opening up Bitcoin futures trading early this December. If you already have experience trading cryptocurrency, the most natural way for you to short Bitcoin is on a cryptocurrency exchange. Many of the major exchange such as GDAX and Kraken give you the option to short the coins on their platform.
Futures trading, CFDs and shorting on leverage are not allowed in some jurisdictions due to regulatory restrictions. Below top reasons banks won’t cash your check that, in the [Coin] field, you will be required to select between the two assets that make the trading pair. You will not be able to transfer any other asset that is not part of the pair. Once you select the asset to transfer, provide the amount, then[Confirm] the transfer. To follow along with this guide, first, create a Binance account and verify your identity. You can check out our comprehensive Binance review for further details about the exchange and how to create an account with the service.
- CoinCentral’s owners, writers, and/or guest post authors may or may not have a vested interest in any of the above projects and businesses.
- In a hard fork, some of the miners refuse to change over to the new protocol.
- Another way to bet against the price of Bitcoin is to spot sell Bitcoin and wait for the price to drop before buying it again.
Interested in profiting from the potential decline of cryptocurrency prices? Shorting crypto, also known as short selling, is a strategy that allows you to profit when the price of a cryptocurrency falls. A contract for differences (CFD) is a financial strategy that pays out money based on the price differences between the open and closing prices for settlement.
How to Identify Bitcoin Trends and Potential Shorting Opportunities
The key difference is that CFDs are settled in fiat currency, not digital stablecoins or cryptocurrencies such as USDT or Bitcoin. Borrowing fees, trading fees and slippage should also be considered when trading spot margin. While they are similar, there are key differences that should be noted and understood.
Shorting Bitcoin is risky, given that the asset is highly volatile compared to most other tradable assets. Additionally, when shorting, it means that you are betting the price will fall, and you will make a profit. The profit potential, in this case, is limited as the price cannot go lower than zero, but the flip side is that the price could continue rising exponentially, exacerbating your losses.
What is the best way to short sell Bitcoin?
Having the option to short Bitcoin gives traders greater flexibility. A skilled trader will often use a mix of both long and short positions to reap gains from market volatility as well as to hedge and manage risk. Meanwhile, the use of leverage, options, futures, and perpetual contracts can bring even greater sophistication to a strategy. In order to short Bitcoin, you need to choose a reliable cryptocurrency exchange that offers short-selling options. Then, you need to borrow a certain amount of Bitcoin from the exchange and sell the borrowed amount at the current Bitcoin market price.
If you’re interested in shorting Bitcoin but are concerned about the risk, you can get a much better understanding of it by using OKX’s demo trading account. Under «Assets,» select «Start demo trading» to enter a few test positions to see how they perform. You can later move to real markets when you feel comfortable with your knowledge and skills.
The CoinCodex Cryptocurrency Price Tracker
These investment derivatives allow you to “bet” on the price of Bitcoin without having to actually purchase it. You could, therefore, predict that Bitcoin will decline by a certain margin or percentage, and if anyone takes you up on the bet, you’d stand to profit if it comes to pass. Another major development that can hurt a coin’s price is the exiting of a key member from the platform. When one leaves a project, it can symbolize the beginning of the end for a coin. It can also represent a shift in the coin’s primary functionality moving forward.
There are several aspects you should consider while shorting Bitcoin. Regulatory changes in the market are perhaps the biggest threats to Bitcoin prices. In the past, major countries, such as China have put heavy pressure on the market.
Please don’t interpret the order in which products appear on our Site as any endorsement or recommendation from us. Finder.com compares a wide range of products, providers and services but we don’t provide information on all available products, providers or services. Please appreciate that there may be other options available to you than the products, providers or services covered by our service. There is no ‘perfect set-up’ for short selling, but there are some things to consider when planning your trades. If the price of BTC falls, BTCDOWN will add leverage in an attempt to increase profits.
These holdings back your position with the goal to ensure the shares will be repaid at the agreed-upon future date. If your short starts to go awry, your lender can, and most likely, will call your margin in. Most platforms only need to provide you with a quick notice to do this.
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