Before you learn how to short Bitcoin, it is necessary that you understand the concept first. This is a popular concept among the crypto traders and especially the people who are not confident about the long-term value of the digital asset and do not want to remain in the crypto space for a long time.
The crypto space is known for its volatility and there are several reasons that affect the prices of the digital assets. This causes some crypto investors to be skeptical about the value and significance of the cryptocurrencies for a long period and in such a case they opt for features such as shorting BTC.
Mentioned below are some of the basic details and elements of the shorting concept that won’t only specify if you ask, “can I short Bitcoin?” but they will also help you understand if this is a suitable feature for you.
How to Short Bitcoin – What Does it Mean
Before you begin, you need to know what “shorting” Bitcoin means. Shorting or short selling is an investment style that helps people in benefitting when the price of a digital asset drops. However, making profits may not be as easy as it sounds as there are several aspects that play a major role in it.
The opportunity to benefit from shorting BTC is due to the fact that its price fluctuates a lot. However, people who want to short Bitcoin need to know more than just the price levels of the crypto king. They need to be familiar with the price movements, patterns and use technical indicators and other such tools to determine when they should short the flagship crypto asset.
This involves fully understanding the concept of shorting and knowing the best and easiest way to short the flagship cryptocurrency. Apart from the basic introduction of shorting, all other basic details are mentioned below.
Considering an Example
Learning how to short Bitcoin is not simple and easy and can be even more complex for people who do not have the relevant information and knowledge. Therefore, it is important for novice traders to properly understand how shorting works.
This can be better understood with an example.
Shorting Bitcoin is related to borrowing the digital asset from a crypto owner. Let’s suppose you have borrowed 2 Bitcoin from a crypto investor when the price is $18,000 and want to sell them for $36,000.
The price of the digital asset drops let’s suppose to $17,000 and you close your position. This will be achieved by re-buying the 2 BTC you borrowed at a lower price. This will be $17,000 x 2 = $34,000.
In this case the profit will be $36,000 – $34,000 = $2,000.
Important Details to Know
If you want to know how to short Bitcoin you should also know the major details that play a part and can help you short the digital currency accordingly.
To describe the shorting concept in simple words, shorting allows people to borrow a digital asset, BTC in this case, or a financial instrument and sell it at the current price of the asset.
With perpetual futures contracts, you can pay back the person you borrowed the digital asset from at a later date.
However, the trade is only beneficial if the price of the digital asset drops after you short it. This also makes it cheaper and more budget-friendly to pay back the person you borrowed BTC from.
How to Manage Risks?
Knowing about risk management is one of the aspects of shorting Bitcoin you should know about, especially if are new to the crypto space. Because of the volatility of the crypto market and other such factors, shorting Bitcoin is a risky endeavor. This is why, most people who opt for shorting BTC use a stop-loss function. This ensures a halting point in case the trade does not go well.
Best Way to Short Bitcoin
Since shorting BTC is related to borrowing an asset the best and easiest way to opt for it is to choose crypto trading platform that supports margin trading.
There are several platforms in the market that offer support to this type of trading. However, they vary in terms of the features and services offered to the users.
Therefore, if you are a new crypto trader you should carefully choose a margin trading platform according to your needs and trading requirements.
Simple Steps to Follow
Knowing how to short Bitcoin can be simpler and easier if you are familiar with a few relevant and helpful factors and steps.
Here are three simple and easy steps you can follow to short the flagship crypto asset.
- Identify a suitable exchange and sign up. Once you have signed up you can deposit the flagship crypto asset.
- Use the available tools and indicators and find the best opportunity to short Bitcoin.
- Once you find a good opportunity you can simple execute the trade.