How to short Bitcoin
How to short Bitcoin
Why would anyone want to short Bitcoin? What is actually meant by shorting an asset such as Bitcoin? How can I short Bitcoin? Let´s answer those questions for you.
The reason anyone would short Bitcoin is that the person believes that the price will decrease. To short an asset means that you borrow that asset, for example, Bitcoin and sett it at the current price. Later, you can purchase the asset to pay back the person or institution you initial borrowed them from when selling them at the first time. The reason anyone would do this is, of course, that they believe it´s possible to repurchase the asset at a lower price than at the first selling.
Let´s do an example
- You short 1 BTC at $4.500 (You borrow 10 BTC from anyone that actually owns 10 BTC and sell them)
- You will get $45.000
- Let´s say the price drops to $4.000
- You now choose the repurchase the Bitcoins for 10*$4.000=$40.000
- You profit will be $45.000-$40.000 = $5.000
Of course, you can lose money if the price rises and you can lose extremely much since there is no limit on the upside. If you buy Bitcoins, you always know that the maximum downside is 100%.
Short Bitcoin platforms
On most platforms that offer any kind of margin trading there are also products available to short Bitcoin.
Short Bitcoin on Bitfinex
At Bitfinex, Bitcoin and other cryptocurrencies can be borrowed for purposes of short sales through the platform’s peer-to-peer financing functionality. The bitcoin borrower may seek offers or make a bid to borrow Digital Tokens on the Financing Order Book. Bitcoin borrowers are not permitted to borrow more than 70% of the bitcoins sold in a short sale. The fiat proceeds of any short sale serve as collateral for the borrowing of the bitcoins until those bitcoins are repaid. Read more about the trading platform in our Bitfinex Review or start trading directly at Bitfinex.
Short Bitcoin on CEX.IO
With CEX.IO you can earn money when Bitcoin price goes down. In terms of margin trading, this is called short position. Go to CEX.IO and choose margin trading at the top menu to read more about how to short Bitcoin at CEX.IO. Read more about the platform in our CEX.IO Review or go directly to CEX.IO and start trading.
Short Bitcoin on BitMEX
You can go long or short on BitMEX trading contracts by simply buying or selling them. You can sell even if you don’t hold any contracts, making BitMEX a valuable tool for “naked” shorting purposes. Read more about BitMEX in our BitMEX Review or go directly to BitMEX and start to trade.