Shorting Bitcoin – Five Ways You Can Short Bitcoin
To short or to long – that is the question for many cryptocurrency traders. If you have no experience in digital currency trading, you may find the previous interpretation of common words very strange. That is why we have to explain it.
For cryptocurrency traders ‘short’ means – to open the position on the exchange, believing that its price will fall. Also, when traders decide to short the position, they to trade this deal for a brief period. The opposite term for the mentioned process – is a long position. Here, traders open a position for long trading, meaning that the price will be increased.
Only true professionals who are trying to conquer the digital currency market during the last five years – can afford bitcoin shorts. Today, we will review five ways to do that.
Five Ways to Short Bitcoin on the Cryptocurrency Market
Some exchanges and brokers offer to trade bitcoin futures. In order to sell a futures contract, you need to sell a certain amount of BTC on a certain date at a specific price, while at the same time, another investor must buy the same amount of BTC. For many traders, this option is better when it comes to shorting crypto.
If by the end of the contract, the value of the asset falls, you will receive a profit in the amount of the difference between the cost of sale and purchase.
Contract for difference (CFDs)
If you liked the idea with futures, but at the same time you do not want to store tokens, you should think about CFD trading. This tool works on a similar principle, according to which the buyer agrees to pay the seller the difference between the current BTC price and the BTC price on the agreed date.
Despite this, the seller receives this amount solely due to the price movements of Bitcoin, and not due to ownership of the asset. Traders who want to trade btc usd short find this method very challenging.
One of the advantages of this method is that participants in a CFD contract can terminate it ahead of schedule.
Using Crypto Exchanges
The advantage is that in the case of a correct forecast and a further decline in prices, you will receive a profit five times the profit without a loan. But precisely the same amount you will lose if your forecast is not confirmed. This must be remembered.
Many investors sell bitcoin on cryptocurrency exchanges. Exchanges to short bitcoin are supported by many famous personalities like the Winklevoss brothers, Roger Vera, etc. Many crypto exchanges provide their investors with a loan that allows you to control more positions than your account balance allows.
Sale of physical assets
The most experienced cryptocurrency investors know that selling bitcoin and other assets is sometimes the healthiest solution during frantic price hikes. If you are already a cryptocurrency investor, you can merge an asset when you think that the value has reached the peak of an uptrend.
Using BSHORT Token
A company ‘Decentracapital’ recently released a new cryptocurrency Bitcoin Short (BSHORT) for traders, who prefer to operate with bitcoin longs and shorts. The token is an inverse derivative of the Bitcoin price: if the BTC rate drops by 10%, then the BSHORT price rises by 10%. Unlike futures, Bitcoin Short does not need to be sold on a predetermined day: you can safely wait until the price of the BTC drops.
Now, it should be clear. So, when it comes to cryptocurrencies, all market participants understand the volatility is very high, and it is possible to lose positions in a few clicks or minutes. Therefore, professionals rarely take into consideration an option to short Bitcoin. In many cases, it is impossible to predict the upcoming wave of the price without proper analysis.