However, short selling is open for other cryptocurrencies using the PrimeXBT platform. Just go to the platform and select those cryptos which you believe will drop in price and place a sell order. Bitcoin and cryptocurrencies, in general, are usually ranked as highly-volatile assets due to unexpected price movements. Volatility affects long positions, and traders that have held Bitcoin and expect the prices to fall can use short-selling to hedge against the risk.

• Many see Bitcoin as a safe haven in a worldwide economy that is volatile, as Bitcoin is not controlled by any government.
• The hype will eventually die down, the uptrend will be exhausted, and a price correction will follow shortly after.
• However, you must have enough money to buy and own the Bitcoin yourself.
• However, in 2022, when most cryptos have retraced a lot from their all-time highs, betting on specific assets to go down isn’t such a bad option.
• However, the global market is not yet sold
  on this idea and this is reflected in its volatility and big price swings.

In a futures trade, you basically agree to buy an asset — in our case, BTC — on the condition that it will be sold later at a predetermined price. Before undertaking a short position in Bitcoin, you should brush up on your knowledge of different order types. CFDs have a more flexible settlement tenure than Bitcoin futures, which have predetermined settlement dates. Additionally, in certain Bitcoin CFD markets, traders can enter into a contract based on Bitcoin’s performance or its performance relative to fiat currency or another crypto. BITI, the first short bitcoin strategy ETF, offers investors the potential to profit on days when bitcoin drops.

Therefore, the risk when using leverage is proportionally greater. Perhaps now you’re ready to make Bitcoin shorting a part of your trading strategy. Use our short-selling example step-by-step guide with links to official data and YouTube videos. Shorting can be an effective investment strategy, but it is much more risky than long-term or averaging. Only experienced traders who can comprehensively analyze market dynamics should open short positions for large amounts. Kucoin.com is one of the best places to short crypto assets while trading in the United States.

Let’s say that you had chosen to open a position to short-sell bitcoin via CFDs. Using our earlier example, if bitcoin was trading at $4000, you could open a position to sell one BTC. As CFDs are a leveraged product, you would only need to put down a percentage of the value in order to open your position.

#4. Open Your Short Position

Specifically, the guide will show you how to short Bitcoin, why you would consider doing it, ways of shorting crypto, and some of the inherent risks you should pay attention to. In addition, there is a detailed step-by-step guide to shorting Bitcoin on the Binance exchange. It is possible to trade crypto on margin, depending on the exchange or brokerage you use, and whether that exchange has offered you the ability to trade on margin. But be warned that there generally are interest charges (you’re borrowing money, after all), and again, a risk of losing more money than you have in your account. But it’s important to understand that shorting any asset, including crypto, is an advanced trading strategy that could easily backfire.

A bitcoin options contract provides you with the option (and not an obligation) to buy or sell bitcoin at a specified price within a specific date range. Options contracts are recommended for advanced traders due to their level of complexity and the use of leverage. They are, however, a flexible option for short selling bitcoin as you only initially risk the options contract premium. Many crypto traders are only familiar with buying or going long crypto, but in many cases, short selling fundamentally weak assets can be just as advantageous. Additionally, short selling offers many benefits for crypto traders including hedging and creating delta neutral strategies. In the guide below, we’ll detail everything you need to know about how to short crypto, from risks and strategies all the way to setting up your first trade.

The moving average indicators help to reduce bitcoin’s volatile price history into a simple trend line. Moving averages encapsulate several indicators, but include SMA (simple moving average),  MACD (moving average convergence divergence) and Bollinger Bands. However, chart patterns can be automatically identified with our pattern recognition scanner, complete with performance ratings to review past successes. Besides what we’ve already mentioned, another risk you should look out for is potential regulations. There have been bans issued on short selling in the past, forcing traders to cover their positions at big losses.

How does a Bitcoin short work?

Kucoin is a non-KYC exchange based in Singapore, meaning the exchange is technically offshore and doesn’t know your identity. So it’s important to understand the risks of trading in a non-KYC exchange — and of short selling crypto in general. Cryptocurrency exchanges that offer futures trading can short sell Bitcoin without owning the actual asset. Instead, the seller enters a contract with a specific time and price that Bitcoin will be sold at. This allows the person to short Bitcoin by speculating the overall price of BTC will be lower in the future.

• PrimeXBT Trading Services LLC is not required to hold any financial services license or authorization in St. Vincent and the Grenadines to offer its products and services.
• Therefore, there isn’t sufficient data or information for investors to make an educated decision about its workings or feasibility as an asset.
• This means the trading fees to short on Binance are highly competitive.
• Many exchanges and brokerages allow this type of trading, allowing investors to ‘borrow’ money from a broker in order to execute a trade.

For example, if your provider’s rate was 50%, you would put down $2000 in this instance. The drawbacks of traditional short-selling have created growing interest in derivative products as an alternative method of short-selling bitcoin. Derivatives are financial instruments that take their price from the underlying market, in this case bitcoin.

Learn how to short BTC and the pros and cons of different crypto short-selling strategies.

Binary options trading allows you to bet on “yes or no” scenarios. This financial product provides buyers with the option but not the obligation to complete the deal. You basically bet on https://g-markets.net/helpful-articles/trading-the-shooting-star-pattern/ whether an asset’s price will go up or down. Margin trading also allows you to use leverage, meaning you can borrow more money from the exchange than you have deposited in your account.

This allows for traders to trade larger amounts and earn bigger returns, but it also comes with bigger risks. Shorting crypto refers to a trading strategy that allows traders to profit from a decrease in the value of a cryptocurrency. The idea behind shorting is to bet on the price of a cryptocurrency going down and then repurchase it at a lower price to make a profit. Average Directional Index or ADX is a tool used for analyzing the strength of a trend.

Shorting crypto can be done in a few different ways, including buying options or futures contracts, trading on margin, or using a contract for difference. Thanks to shorting, investors can bet on falling prices and profit from market downturns. In the past, Bitcoin price and with it crypto markets have moved in cycles, which have followed a repeating pattern. Each cycle started with a Bitcoin halving, which cuts the miners’ block rewards in half. This halving decreases Bitcoin’s inflation and reduces the BTC supply coming onto the market.

Manage risk when shorting bitcoin

Examples of these products are the 21Shares Short Bitcoin ETP and the BetaPro Bitcoin Inverse ETF, but it is unavailable to US residents. When the date of fulfilling the obligations is arrived at, you will agree to sell your contract at a lower price. There are many perks to short selling through futures, with the most outstanding being that it allows a new investor to invest a small amount, which allows them to learn. With margin trading, you borrow Bitcoin from a broker, and you can use the borrowed amount to execute a trade. Borrowing through margin trading is similar to borrowing money from a bank, as you will have to pay back with interest. Cryptocurrency leverage platforms have evolved rapidly over the years and created different ways for people to sell Bitcoin with leverage, also known as shorting Bitcoin.

The losses you make with short selling will surpass your initial investment. If the price of Bitcoin keeps appreciating, the only alternative you have to minimize the losses is to buy back at a higher price. The risks of loss from investing in CFDs can be substantial and the value of your investments may fluctuate. 72% of retail client accounts lose money when trading CFDs, with this investment provider. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.

Prediction markets in crypto are similar to those in mainstream markets. Investors can create an event to make a wager based on the outcome. For investors who believe that Bitcoin (BTCUSD) is likely to crash at some point in the future, shorting the currency might be a good option. The number of venues and ways in which you can short Bitcoin has multiplied with the cryptocurrency’s increasing spotlight in mainstream finance.

Therefore, if you are well-versed with the market trends, short selling can turn out to be lucrative. Any cryptocurrency that is available on a margin or futures trading platform can be shorted. The most popular crypto assets such as Bitcoin, Ethereum, XRP, Cardano, and Solana can be shorted with leverage.

Connecting your wallet allows you to access the platform and start trading cryptocurrencies with leverage. First, you must transfer your crypto assets from Ethereum to the Polygon network. Polygon is a fast, secure, low-cost alternative to the Ethereum network. By bridging your crypto to Polygon, you can access shorting platforms with lower transaction fees and shorter confirmation times.

Short selling involves borrowing a cryptocurrency from a broker or a cryptocurrency exchange and selling it at the current market price. According to your expectations, the asset’s price will drop over time. If this scenario happens, you buy back the asset at a lower price and repay the debt, making a profit which is the difference between your selling and buying prices. This short-selling strategy refers to an investor’s being “short” of the coins. Then, they buy the asset when its price drops, making a profit which is the difference between the selling and buying prices.

Short-Selling Bitcoin Assets

Once you have found an exchange that allows you to short crypto, you must open an account and complete the necessary verification processes. You will also need enough funds to cover the cost of borrowing the crypto you plan to short. Bitcoin, the world’s largest and most popular cryptocurrency, has seen incredible growth over the past few years. However, as with any investment, there is always the risk of a downturn. One way to potentially profit from a downturn in crypto price is by shorting it. Only invest if you are very confident that prices will drop, and if you have money to cover your losses if investments rise.