5 Ways Any Trader Can Successfully Short Sell Bitcoin

by Andrew McGuinness     Jul 16, 2019

While many in the Bitcoin and larger cryptocurrency community believe that holding your investments over the long-term is the best way to earn a sizable amount from the cryptocurrency craze, there are some reasons to believe that it won’t grow as much as it did in previous years. In this case, it might not be such a bad idea to start taking advantage of Bitcoin’s volatile nature, and start selling it short.

“Shorting”, as Trading 101 teaches, is when a trader buys a stock or investment for the short term on a dip, hoping that they can earn more once it returns to its average value. Many day traders have found plenty of success shorting Bitcoin. Here are 5 ways any trader can successfully short sell Bitcoin:

1) Short-Selling

The easiest way to short Bitcoin is to keep it simple: short-selling it. This technique may not be for everyone, and there’s a good reason why: plenty of stress and waiting is involved. Short-selling Bitcoin is easy and anyone with access to a cryptocurrency exchange can do it. Simply sell your tokens at an average high and buy them back at an average low.

Over time, you would end up with many more tokens than you started with, assuming it all goes to plan. However, it doesn’t always work out: if the price never returns to the low point that you expect, you could end up buying back in at a much higher price, losing many tokens in the process.

2) Binary Options Trading

For another means to short Bitcoin, there is what is known as call and put options. This is when a trader uses an escrow service (or something similar) to create a put order. The put order means that you are willing to sell the Bitcoin at the average price of the day, even if the prices falls at some point during the day. Offshore exchanges offer the ability to use binary options, however, be warned: both costs and risks are sizable.

3) Margin Trading

Another easy method of shorting bitcoin is by using a margin trading platform for cryptocurrencies. Margin trading is when potential investors contact a broker to borrow money from them; this money will be used to purchase Bitcoin, and this type of service can be found on most exchanges. When partaking in margin trading, take account of the leverage factor, which could make or break your deal. Plus500, AVAtrade, and BitMex are some popular destinations for daily margin trading.

4) Prediction Markets

Prediction markets are relatively new in the cryptocurrency scene, with the first prediction markets popping up in 2017. However, these are still a great means to short Bitcoin and other digital currencies.

They do this by letting investors “predict” the outcome of an event, in which they will bet on the outcome and win or lose with that prediction. This essentially allows you to trade Bitcoin without owning or dealing with Bitcoin; if you predict that Bitcoin will rise or fall by a certain amount, and if another investor bets against you, one of you will profit off the prediction. One popular prediction market for cryptocurrencies is Predictious.

5) Futures Market

Like the prediction markets, the futures market is relatively new when it comes to Bitcoin and cryptocurrencies. Futures trade may be one of the more confusing types of shorting for newcomers, but once you get a hang of it, it is possible to expect plenty of gains. A futures trade is when one individual buys a security; the buyer believes that the security’s price will inevitably rise, allowing them to get better value in the future.

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