How to Short Bitcoin, Explained [in 2020]
Bitcoin is the leading and founding cryptocurrency of the world, which is regarded as the top crypto for investment purposes if one aims to mint money off trading. However, the Bitcoin does carry a high-risk high-profit vulnerability in the market.
If you hold Bitcoin crypto assets as an investor and hold a gut feeling, due to market observation patterns, that the Bitcoin is about to crash in the near future, shorting the Bitcoin might serve you well.
What is Short Bitcoin?
Shorting Bitcoin refers to an investment method within which you can make money while the Bitcoin’s price drops. In a layman’s language, short-selling of Bitcoin is when an investor borrows shares and immediately sells them, hoping he/she can scoop them up later at a lower price, return them to the lender and pocket the difference.
How to Short Bitcoin?
To get involved in short selling Bitcoin, you must understand the principals you need to keep in mind while getting indulged in short selling Bitcoin.
btc usd
Analyze the market before shorting Bitcoin:
- Study the past events that triggered major sell-offs
- Keep a check on crypto regulatory action in significant countries
- Current events that might harm the price
- Cryptographic primitives breach
- Darknet market failures, and more
Best 4 Methods of How to Short Bitcoin
Here are four answers or methods you can use for your ‘how to short Bitcoin‘ answer:
1. Direct Bitcoin Short Selling
By short selling your Bitcoin directly at a price you’re comfortable with to an individual or a Bitcoin exchange, you can easily benefit while buying back the crypto assets when the price drops, thereby, giving you an extra profit margin.
Direct short selling allows you to exchange your Bitcoins at a higher price (say $1,000) and repurchasing them when the price drops to ($800), thereby giving you a decent profit margin depending on the risk taken ($200 in this case).
Some Bitcoin Exchanges are:
2. Bitcoin Binary Option Trading
If you’re trading your Bitcoin assets using an escrow service that allows you to put and call your fiat currency on the cryptocurrency, you can also short-sell Bitcoin directly at the binary options trading platform.
For example–> if you put an order on the trading platform for the current Bitcoin value of $1,000, and the price drops by 70-74% later in the next few days, you can call your order and gain a profit of 70-74% from the Bitcoin returns.
Some crypto-trading sites are:
- Coinbase
- Binance
- Bybit (4)
3. Bitcoin Future Trading
As an investor, you can also try short selling your Bitcoin in a futures market. Within a futures market, you sign a contract that states that you commit to buy Bitcoin at a predecided date in the future at a specified price.
However, be sure of getting involved in a future trading contract as selling it off later would only bring up a bearish mindset and degrade reputation as an investor. By getting involved in the agreement, you’re making a future prediction that may benefit you when the price of Bitcoin drops.
4. Bitcoin Margin Trading
Bitcoin margin trading is another excellent method you can use for short selling your Bitcoin while trading. In this method, you borrow money from a broker and then invest it in short selling. Later on, if you make a profit, you pay off the fixed amount to the broker while keeping the profit in your pockets.
Note: Bitcoin Margin Trading involves borrowing money to make profits. Hence, try to ensure that your market predictions are as precise as they can be.
Conclusion
Overall, these were the top 4 methods that you can use to short-sell your Bitcoin in the market while simultaneously minting profit from the right future price predictions for Bitcoin. It is not recommended to get involved in short-selling when you’re a novice at Bitcoin trading as your knowledge in the market is not deep enough. However, if you trust your instinct, go ahead and short-sell your Bitcoins to mint profit.