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How to Short the Crypto Market

How To Short-Sell Cryptocurrency

Are you a crypto investor — Bitcoin in particular? Have you ever felt like it’s going to drop in price at some point in the future? If yes is your answer to these questions, you certainly won’t be wrong to keep up with what we’re about to explore. For the most part, there are quite a number of ways to profit from Bitcoin even if it the price crashes today. And of course, everything falls under the umbrella or concept of short-selling.

Trying to figure out what it is? Well, you’re not alone, but first, let’s take a quick look at Bitcoin’s price history. First off and as we already know, the cryptocurrency Bitcoin made a promising entrance in the financial world in 2009. And of course, the currency garnered interest and continued to grow steadily over the years. Fast forward to the first half of 2017 — its price was lingering around $1,000, reached $5,000 in October and passed $7,000 in early November. Of course, it didn’t stop there — at December 14, 2017, the price was valued to be over $17,000 and amazingly it breached $19,000 on the 17th (famed to be a new all-time high).

But what’s happening today? Well, at the moment, Bitcoin is hovering around $6,424. But of course, there are still predictions that it could surpass $25,000 in within the next few years.

So exactly what does short-selling have to do with Bitcoin’s price fluctuations?

Well, Short-Selling, for the most part, gives investors the opportunity to gain from the drop in price of Bitcoin or any other promising cryptocurrency. So yes, it basically has to do with betting against the cryptocurrency and of course, hoping that it’ll experience a price decline in the future. In a nutshell; with short-selling, you can actually hit up your bankroll when Bitcoin or any other investment drops in value.

And as mentioned earlier, this post will explore several different ways you can make the most of this incredible investment technique.

Sounds good? Let’s dive right in!

1. Direct Short-Selling of Bitcoin Assets

This is perhaps the easiest way to short-sell Bitcoin — it’s basically targeted at those who are interested in buying and selling the cryptocurrency. So how does it work? Well, direct short-selling demands that you sell your tokens at a favorable price and of course, hope that the price drops or crashes further. And yes, should things go as planned, you can buy Bitcoin again at a cheaper price — it’s the perfect win-win! But hey, you should be aware that you’re likely to lose your assets (money or Bitcoin) if your price prediction fails — just a fair warning.

2. Margin Trading

Ever heard of crypto margin trading platforms? More like leading exchanges that support margin trading? If yes, you can actually start short selling Bitcoin right off the bat and hope that you make a good profit. In the world of margin trading, investors basically borrow money from a broker and use the same to make a trade. Of course, the big idea here is to hope that your bet increases your profits and not otherwise. Some of the best and most popular crypto exchanges for margin trading include Bitfinex, BitMex, Kraken, Poloniex, AVAtrade and more.

3. Binary Options Trading

Moving forward, investors can also increase their chances of short-selling bitcoin by taking full advantage of call and put options. It’s however important to note that our core focus will be on the put option contract (it allows you to bet that the price of an asset will go down). Essentially, when you execute a put order, you’ll be able to sell a specific amount of Bitcoin at the most recent price regardless of whether it drops afterward. With this in mind, you should be aware that binary options trading comes with pretty high risks. So yes, you won’t be wrong to do your research before trying it out.

4. Futures Trading

Still looking for another proven way to short-sell Bitcoin? Just enter the futures market. For the most part, you can actually figure out how to short sell Bitcoin in the futures market. In this type of trading, a buyer (which happens to be you) agree to purchase Bitcoin at a fixed price in the future. So yes, you’re basically in a contract where you’re forecasting (and expecting) Bitcoin’s price rise. And should things go according to plan (that’s after the contract), you’ll be able to purchase the cryptocurrency at a much lower price.

5. Prediction Market

Finally, you can short Bitcoin by getting involved with prediction markets. Essentially, these markets give investors the chance to predict the price of Bitcoin and if it comes to pass (basically within a particular margin or percentage), they’ll get paid. Some popular examples of prediction markets include Predictious, Stox, and Augur.

Summing it up from top to bottom, we can see that short-selling isn’t your regular investment strategy. It’s basically one that demands a sound understanding of the markets and ability to utilize complex techniques that’ll drive results within a specific period of time. All in all, it’s a difficult and incredibly risky strategy. But of course, you’re likely to benefit from it if you know exactly how to play your cards right. Good luck!