How Do You Short Bitcoin And Other Cryptocurrencies?
When you first get into cryptocurrency, the assumption is that you have to follow the trending or spiking markets to make any money. However, there is another way to keep your finances flowing – shorting.
Shorting will allow you to make money even when the market is failing. But to learn how to short bitcoin, you first need to understand what it entails.
What Is “Shorting Bitcoin”?
Normally when you buy bitcoin or any other cryptocurrency, you need to make a purchase when the price is low and sell it off when it reaches a high point. This allows you to make a simple profit.
However, when you attempt shorting, you buy the currency when the price is high, sell it on, and then buy it back once the price has dropped. When you buy it back, you need to ensure you’re repaying your capital.
The idea is to buy the coin when it’s expensive, which drives too much traffic to the currency. Then you sell it while it’s at this peak (thereby making your money back). Eventually, the economy will drop, allowing you to buy the coin again but at a cheaper price.
If you can predict when a cryptocurrency will have a dip or spike, you can use that information to decide if shorting is your best option.
5 Ways To Short Your Cryptocurrencies
There are only a handful of ways to short your cryptocurrency but depending on your state or type of crypto, only a few will be available to you. To know which methods you can use, read through the 5 suggestions and map out how any could affect your shorting plans.
Margin Trading
Margin Trading is arguably the easiest of our 5 options and is accepted by most crypto exchanges (mainly Phemex, FTX, and Binance Futures).
To complete this shorting technique, you need to borrow the crypto from a broker. The broker then offers you an exchange rate in the form of a percentage. You then have a set amount of days to pay the broker back, and in that time you can sell the bitcoin on.
Futures Trade
A futures trade is when you buy the cryptocurrency at a set price and this set price is fixed until a future date. If the currency falls past your set price, then you will make money from selling at this difference. However, if the price begins to rise, you may have to pay more.
To do this you need to contact a broker which offers this service, but before you commit you should research the rise and fall of the currency you are trading with.
Contract For Differences
Also known as CFD, Contract For Differences is very similar to futures trading. The idea is to pay out money based on the price difference between the closing prices of a settlement and the opening ones.
Instead of putting money on the coin itself, you’re putting money on the price it ends up being. When you buy a CFD, you’re betting that the cryptocurrency will fall.
Binary
The idea behind the binary method is to sell your currency at the price it’s worth when you buy it, even if that price drops later on. This allows you to control your losses, and if you fail to get a buyer then you will not lose your currency.
This means you will either make a profit from selling when the price is high or you lose your money due to the open trade.
Betting On Predictions
The last way to short your bitcoin is to bet on it. Technically this is called the Prediction Market, but what you’re doing is placing a wager on when the currency will drop and how much it will drop in percentages.
If anyone takes you up on that bet, then the wager begins. If you know how to read market trends then this option may be the best for you, as you don’t need to lend funds or develop convoluted strategies. You simply follow your research.
The Pros And Cons Of Shorting Your Crypto
There are pros and cons to anything, but when it comes to finances you need to take them into consideration.
The con to shorting your crypto is financial losses, needing to have funds before starting, and losing interest.
The pros are gaining profits in a down season.
Summary
With the 5 methods above, you can learn to short your bitcoin when the prices are running high – allowing you to make a profit no matter what the market is doing.
How Do You Short Bitcoin And Other Cryptocurrencies?
