How do I short Bitcoin on Bitfinex or BitMEX?

How to short Bitcoin

Updated 2020-09-05

In this article we will answer the simple question, how do I short Bitcoin? We will do this by explaining in detail what shorting is, go short or short selling is. Further, we will compare how to short bitcoin on different crypto trading platforms such as Bitfinex and BitMEX.

This article reviews available platforms that provide the short (sell) order position within their margin trading marketplace. The main question we ask in this guide is how do you short bitcoin?

The guide touches upon trading platforms that allow you to short bitcoin, using different margin trading functions. The reviewed websites are BitMex, Bitfinex, and eToro. Each of the platforms is investigated in terms of margin trading functions, fees, service availability and liquidity of the coins. The pros and cons are then constructed, in order to provide you with comparative analysis.

 

What is Shorting 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

  1. You short 1 BTC at $4.500 (You borrow 10 BTC from anyone that actually owns 10 BTC and sell them)
  2. You will get $45.000
  3. Let’s say the price drops to $4.000
  4. You now choose the repurchase the Bitcoins for 10*$4.000=$40.000
  5. 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%.

 

What is Shorting Bitcoin on Youtube?

Below you can see a Youtube video describing how to short Bitcoin. The video was posted by sunny decree in 2017 but is still great in 2020.

Where can I Short Bitcoin?

You can work with both exchanges and trading platforms when shorting the coin of your choice. These platforms differ in terms of costs, service availability and margin trading functions that you can use while shorting cryptocurrencies.

No matter where trader lives, large players offer services globally, with very few restricted regions.

What you need to look after is the fees, the available leverage, the available cryptocurrencies and the underlying cryptocurrency.

How to short Bitcoin on BitMEX?

Based in Seychelles, BitMEX platform is a strictly crypto-to-crypto platform that offers margin trading for its clients. You can short 11 cryptos, bitcoin and Ethereum included, with several functions available for you. Functions that you can use are FillorKill, GoodTillCancel, ImmediateOrCancel, and Reduce-Only, as seen below.

Below you see a screenshot on what cryptocurrencies are available for shorting on BitMEX. Those are Bitcoin, Cardano, Bitcoin Cash, EOS token, Ethereum, Litecoin, Tron and Ripple. Always remember to check what underlying asset there is when you are trading. For example, Ethereum can both be traded as ETH/USD and ETH/XBT and this makes a huge difference in the end result.

 Also, you can see what leverage is available in the lower left corner. For shorting any crypto at BitMEX you click the red button on the left side indicating “Sell/Short”.

How to short bitcoin on Bitmex available cryptocurrencies and leverage

The usable leverage can range up to 100x, meaning that you are borrowing 100 times more coins than what you have in balance. Service is available globally while fee structure is designed by maker/taker orders (from -0.025% to 0.25%).

Before you start trading with 100x you must evaluate the risks. For example, if you use 100x leverage and the asset price decrease 1% your order is probably liquidated. 

You do not need to verify your identity in order to be able to short your crypto position.

Pros

Cons

Use are referral code for BitMEX and get 10% from the trading fees the first 6 months.

Bitfinex

Bitfinex is the largest BTC to USD trade, offering a large liquidity rate for its clients. The exchange offers margin trading with short position included. You have limit, market, Stop, Stop-Limit, Trailing Stop, and Fill-or-Kill functions, much like in BitMex. The leverage function can be set on maximum 3.3x. You have over 40 coins readily available for a short position at any time.

How to short Bitcoin Bitfinex

Bitfinex offers several security functions, such as 2FA, email notifications, IP address whitelist, and communication encryption. Service is available globally though you would need to verify your account before you are able to deposit/withdraw funds from Bitfinex. Much like BitMex, Bitfinex also employs maker/taker cost structure, ranging from 0% to 0.2%.

Pros

Cons

eToro

If you are a starter that needs a little bit of a helping hand would much for your profit margin when shorting cryptos. Thus, eToro is one of the most popular choices when it comes to margin trading. The website is one of few platforms that offer crypto social trading. This means, among many other features, that traders can copy short orders from successful traders. Verification is needed while service is available globally.

How to short Bitcoin eToro

Trade itself offers 7 cryptocurrencies, with only several functions available, them being stop-loss and take-profit. Leverage is quite high for cryptocurrencies once the real account is set, leveling on 400x. There are no trade fees for short positions when cryptos are concerned.

Security is of the average value since you have two-factor authentication (2FA) and email alerts. You also have the ability to invest in short positions made by other investors, learning about the crypto trade in the process.

Pros

Cons

Go Short Bitcoin VS Go Long Bitcoin

What are the differences between go short Bitcoin and go long Bitcoin. 

The simple explanation is:

If you go short Bitcoin you will profit from a decreasing Bitcoin price.

If you go long Bitcoin you will profit from an increasing Bitcoin price.

However, in trading you must always evaluate the risks as well. Lets take an example assuming you are trading with no leverage.

Shorting usually involves higher risk since you speculating against an increasing price of the underlying asset. Since no asset has any upper limit the price can, in theory, reach the sky.

On the other hand, if you go long you are speculating against a decreasing price and since the lower limit always is zero for the underlying asset. 

Remember that shorting usually is used with leverage and if you trade with leverage the above rules doesn’t apply since the floor is not zero anymore for the underlying asset. The lower limit now is dependent of your margin.

Conclusion – How do I short Bitcoin?

In this review, we have answered the question on how to do you short bitcoin. We uncovered that short (or sell) orders are meant for users who are very familiar with margin trading. Only eToro really offers services for starters, helping them gain knowledge while trading at the crypto market.

We would recommend you to work with either eToro or BitMex if you are a starter. The BitMex offers non-verification environment while eToro gives tools to learn quickly about shorting bitcoin. Bitfinex is the best place for experts, with its deep liquidity and the large specter of functions available for you.

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