Monday, August 15, 2022

How To Short Crypto In The Us

What Is A Bitcoin Short Squeeze

Short Selling Crypto On FTX | A Step By Step Guide

The short squeeze is a situation in which the price of Bitcoin starts to increase drastically. In this situation, traders are usually trying to close their positions because their short orders incur losses.

Since these peaks are rarely stable, youll be forced to incur a loss. Because of that, always leave the stop-loss function, indicating the price level you will incur an acceptable loss.

Why Could Short Selling Btc Be Bad

There are at least two scenarios where shorting does not generate the expected profit:

  • The price does not drop at all. This is the most unfortunate scenario, which indicates that the trader has poorly predicted the development of the situation and incorrectly defined the current trend of the cryptocurrency. The price has not fallen, but it has remained at ten bitcoins, which should be returned with interest.
  • The price falls, but less than planned. For example, the bitcoin has fallen not to $6,500, but to $6,800 and is not going to fall again. The rate is entering the upward trend again, and if the trader wants to make at least something on the shorting, he will have to pull the deal right now. With such a difference in rates, his dirty profit will be $2,000. Of that, almost $1,700 will be spent on commissions. His net income will be $300. And if the rate drops to $6,800, the commission will cut off the profits from the shorting. Hell just go down, paying off the loan debt.

Risks Associated With Shorting Cryptocurrencies

Going against the cryptocurrency bulls is very risky and in my opinion, should be done only in a short-term perspective. You do not want to put your money on the line, thinking that the cryptocurrency market will collapse, which is very unlikely to happen. Long-term shorting cryptocurrencies is, therefore, from my personal standpoint out of the question. Here is the deal. Timing is crucial when shorting cryptocurrencies as you want to stay in a position for a couple of minutes or hours. Remember that while the bulls take time to build and develop, the bearish moves tend to be relatively short and sharp.

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What Does Shorting Crypto Mean

Shorting crypto is the process of selling cryptocurrency at a higher price, with the aim of repurchasing it at a lower price later on, ideally in situations where a crypto assets price is expected to fall.

The reason its called short selling is that youre short of the coins. You dont actually own the crypto that you intend to profit from. To understand shorting, you need to be familiar with crypto long and short positions. When you go long, it basically means that youre buying cryptocurrency, expecting its market value to go higher. For instance, you buy an altcoin at $10 and expect its price to hit $12. You sell it once the price increases in order to make a profit.

On the other hand, shorting means you borrow a cryptocurrency and sell it at the current market price, expecting it to fall. Then, you buy the coin when its price falls or retraces slightly, making a profit which is the difference between your selling and buying prices.

Heres an example:

  • You intend to short one Bitcoin when its value is $45,000, since you expect its price to fall in the next few days.
  • You borrow a Bitcoin from a broker and sell it for $45,000.
  • A few days after you borrow the Bitcoin, BTCs price falls to $40,000.
  • You buy a Bitcoin for $40,000 and return it to the broker.
  • Now youve made a profit of $5,000, minus any interest that you have to pay the broker for borrowing the Bitcoin.

Bitmex Best For Leverage

How To Short Crypto In Us

Supported cryptocurrencies to short on Bitmex

Today Bitmex supports short selling in 8 cryptocurrencies.

Here is a full list of all cryptocurrencies available to short-sell on Bitmex:

  • BTC

The reason why you would like to use Bitmex might not be for obvious reasons.

They dont have the longest list of supported coins.

However, they do have something that not many other exchanges have.

They support short-selling in cryptocurrencies with very high leverage.

From 20x up to 50x leverage on Ethereum.

This has made Bitmex very popular in the latest years.

If you know how to trade crypto with leverage you can make good money by using a lot of leverage

Short sell trading fees on Bitmex

The fee to short-sell cryptocurrencies on Bitmex is 0.25%.

The fee to short-sell Bitcoin is 0.075%.

Take a look at this fee table where you can see both the trading fees and the leverage for each coin.

Whats so special about this fee table is that there is a huge difference between the Maker Fee and the Taker Fee.

So, whats the difference between a Maker Fee and a Taker Fee in crypto?

The answer is very simple.

You either take orders from the order book , or you make orders in the order book .

When you use market orders to trade crypto you are taking orders from the order book.

When you use limit orders you are taking orders for the order book.

Did you see the difference?

Good, but why is there a difference in the fee structure for these two?

Pretty cool.

Now, how do you short crypto on Bitmex?

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Short Selling Bitcoin Strategies

When shorting bitcoin, traders can use many types of analytical strategies. These strategies vary by type of analysis, time frame and risk appetite. However, a key decision traders make when they are starting out is if they are going to focus on technical or fundamental analysis strategies. Some traders utilise a blend of both, especially if both strategies suggest similar information.

How To Start Shorting Cryptos

If youre interested in shorting cryptos, follow our step-by-step guide:

  • Find a trend The cryptocurrency market is extremely volatile and can be influenced by any number of factors. Developments in news, politics or even celebrity culture can all influence the value of popular cryptocurrencies. Make sure you carry out careful analysis of the asset you want to start shorting, be it Bitcoin, Ethereum, Ripple or another.
  • Open a margin trading account Most of the top crypto brokers offer short selling capabilities with leverage, including Binance, Coinbase, eToro and Kraken. However, regardless of whether youre from Canada, India, Europe or elsewhere, its important to adhere to regulations in your country. For example, investors in the UK can no longer trade derivatives on cryptocurrencies.
  • Minimise your risk The digital currency market is turbulent and losses on short positions can grow exponentially. Make use of stop losses and take profit levels in your trading platform to limit your exposure. Many brokers also offer useful crypto shorting calculators.
  • Open your position Once you have determined your entry and exit points, go short and sell the cryptocurrency that youre interested in.
  • Read Also: Where Can You Sell Bitcoin

    The Good News And The Bad News On Shorting Crypto

    The bad news on shorting crypto is there are very few ways for an upstanding US citizen who isnt an accredited investor to short cryptos in some states and the number of coins one can short is limited.

    While Kraken, Poloniex, and Bitfinex will be viable options for those in most states, in a few states using CBOE Bitcoin futures or CME Bitcoin futures to short Bitcoin might be your only options. That means in some states you will end up ONLY being able to short Bitcoin via the CBOE and CME cash settled contracts.

    To add to that bad news, there are actually only a handful of brokers who will let you access Bitcoin futures .

    Meanwhile, even with Kraken, Poloniex, and Bitfinex, your options are limited to the coins they allow shorting on .

    The good news in all that bad news is this however, 1. anyone can open an account with one of the above brokers, and 2. even if your options for cryptos you want to short are limited, all cryptos tends to follow each other .

    With that covered, lets move onto all the different options a person has, including those who dont live in the U.S., are accredited, or who like to live dangerously.

    Shorting Crypto On Coinbase

    How to Short Crypto on Binance (Step By Step)

    Coinbase is a US-headquartered company and one of the most popular crypto exchanges worldwide. Margin trading is no longer available on Coinbase but you can start short selling without leverage using futures contracts. So once you have signed up for an account, identify a downward trend on one of the dozens of coins available and then take your position.

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    Short Strategies In Crypto Trading

    Shorting crypto can be a high-risk strategy, but it can also lead to big profits in a short amount of time. For this reason, it has become increasingly popular among traders in recent years. However, before taking a short position

    Head and Shoulders pattern

    If you’re interested in shorting crypto, you’ll want to be on the lookout for a head and shoulders pattern. This is a technical indicator that often signals a reversal in a trend, and it can be a good opportunity to short sell.

    To spot a head and shoulders pattern, you’ll look for three consecutive peaks, with the middle peak being the highest. The “shoulders” should be roughly equal in height, and the formation is usually followed by a drop in price. If you see this pattern forming, it’s a good time to consider shorting crypto.

    Of course, you’ll need to do your own research to confirm that the trend is indeed reversing before shorting. But if you’re able to correctly identify a head and shoulders pattern, it can be a lucrative way to short crypto.

    Double Top pattern

    Another great way to short crypto is by looking for a double top pattern. This happens when there’s a significant price increase, followed by a period of consolidation, and then another price increase that fails to reach or sustain new highs. This signals that the uptrend may be reversing and that it could be a good time to short.

    Is Shorting Bitcoin Risky

    Shorting anything involves substantial risk. The main thing investors might want to understand is that shorting can result in unlimited losses.

    This can occur because theres no upward limit on the price of Bitcoin. After having entered a short position, traders take a loss if the underlying asset goes up. The more the price rises, the more losses pile up. In this way, an investor who is short Bitcoin can go bankrupt quickly if the price doesnt retreat. This risk can be hedged using a stop-loss, which will automatically close out a trade at a specific price level.

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    How To Short Cryptocurrency: The 4 Methods

    Before we get started, I want to clarify that this is not financial advice, and this post aims to help you understand the concept of shorting crypto. It carries risk, with investors potentially losing an infinite amount of money if it goes wrong. It is essential that you understand the risks involved and be able to manage those risks appropriately.

    Now lets dive into the meaning of short trading with crypto:

    Crypto Short Selling Example

    How To Short Crypto In Us

    Let’s say you think the price of Bitcoin is going to drop. You could short sell Bitcoin as a way to profit from that price drop. To short sell crypto, you would enter a sell order with a broker who allows margin, sell it at the current price, and then buy it back at a lower price. Generally speaking, you don’t have to “return” the tokens or shares to the exchange you borrowed them from, it simply happens automatically when you hit the “buy back” button.

    The difference in price would be your profit.

    For example, let’s say you short-sold Bitcoin at $10,000 per coin. If the price dropped to $9,000 per coin, you would buy it back. Then, you would keep the $1,000 difference as your profit. $1,000 times the number of tokens you shorted would be your profit, minus commissions.

    Of course, if the price of Bitcoin goes up instead of down, you would still need to buy it back at that higher price in order to return it to the exchange you borrowed it from. So, short-selling crypto can be risky since there is no limit to the losses you can incur if prices rise. But if you’re right and the price does go down, you can make a nice profit.

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    How To Short Altcoins

    Do you want to make profits while the price of Altcoin drops? Its probable. Its likely. Necessarily, a short position on Altcoin implies that we believe in a decline in the Altcoin price. Technically speaking, short positions operate first by selling the base asset, Altcoin, in this situation, and then purchasing it back. You dont have to worry the markets immediately do this for us.

    Can You Short Cryptocurrency

    Yes, it is definitely possible to short sell cryptocurrency. After reviewing countless platforms Ive found some better than others. The best crypto exchanges that allow shorting are usually are not always regulated but if you choose one with a good reputation you dont have to worry.

    The exchanges Ive listed in this article are in my opinion the best ones. Some of them have very good trading interfaces, there are a lot of coins to trade and they are also trusted exchanges. I would not recommend trading on any crypto platform without any kind of reputation.

    For example Binance. Most traders have heard of Binance and thats because it has a good reputation. I would say that Prime XBT and ByBit and the lesser-known platforms in this exchange review. Ive used these exchanges for a while and thats why I now recommend you use them.

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    Can You Short Crypto

    In short, yes. Like in any financial market, you can take short or long positions on cryptocurrency. Taking such positions can prove to be smart leverage against the volatility of the market. If you play your cards right, you could be able to make money whether prices go up or down.

    Right now, you might be asking yourself how you can short sell cryptocurrency.

    There are four different methods to shorting crypto, which Ill go through with you.

    Procoinbasecom The Coinbase Margin Broker Platform

    How to SHORT Bitcoin and Crypto on KuCoin | Explained Step By Step

    Coinbase is one of the big Spot Market exchanges in the USA where Bitcoin and some big altcoins can be bought and sold. The trading company operates 2 separate platforms for different trading activities.

    On the main page Bitcoin and altcoins can be bought and sold against USD . The Coinbase Pro platform is a separate website aimed at traders who want to trade cryptocurrencies for profit and who prefer an advanced trading environment.

    Leverage 1:3

    One of the advanced trading features the Coinbase Pro platform has to offer is a slight leverage. The platform offers leverage of up to 1:3 for selected traders. This will probably have to be requested and activated.

    Coinbase the main site of the company can be used in all US states, but there are restrictions for the usability of certain services depending on the US state, because Coinbase holds a separate license for each state. However, not all of them include the participation in Money Transmission, so the USD Wallet is not available in some states. Read more about this here.

    Coinbase Pro supports about 30 cryptocurrencies. However, there are very different conditions. While some can be bought, others can only receive and send.

    However, margin trading with 3x leverage can only be made available to selected traders from 23 US states. For licensing reasons Coinbase Pro can therefore only be used in the following states:

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    What Are The Risks Of Shorting Bitcoin

    There are two main risks to shorting Bitcoin. The first one is price risk. Price volatility in the underlying asset can make it difficult to accurately predict the price movement of the underlying asset. The second main risk is the absence of a standard regulatory framework for Bitcoin around the world. Some of the biggest futures trading venues of the cryptocurrency are not regulated. This means that investors have fewer recourse options if something goes wrong with their trade.

    How Much Us Crypto Tax Do You Pay

    Calculating how much cryptocurrency tax you owe in the U.S. is based on how long youve held the assets prior to disposing of them, as well as which income tax bracket you fall under.

    This is divided into two parts:

    • Short-term capital gains: Profits from a crypto asset held less than a year are taxed at the same rate as whichever income tax bracket youre in. Any losses can be used to offset income tax by a maximum of $3,000. Any further losses can be carried forward.

    Short-term U.S capital gains tax brackets

    • Long-term capital gains: For crypto assets held for longer than one year, the capital gains tax is much lower 0%, 15% or 20% tax depending on individual or combined marital income.

    Long-term U.S capital gains tax brackets

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    Proshares Is Launching A Short Bitcoin Etf This Week

    • Eight months after establishing the first U.S. bitcoin futures ETF, ProShares plans to launch the first short bitcoin-linked ETF on Tuesday in the U.S.
    • The ProShares Short Bitcoin Strategy is designed to give investors a way to profit from declines in the price of the cryptocurrency.
    • Bitcoin fell to new a new 2022 low over the weekend of $17,601.58, after six months of declines amid the broader sell-off in risk assets.

    Eight months after establishing the first U.S. bitcoin futures ETF, ProShares plans to launch the first short bitcoin-linked ETF on Tuesday in the U.S., the provider of investment products announced Monday.

    The ProShares Short Bitcoin Strategy, which will trade on the New York Stock Exchange under the ticker BITI, is designed to give investors a way to profit from . It will have an expense ratio of 0.95%.

    Bitcoin fell to new a new 2022 low over the weekend of $17,601.58, according to Coin Metrics, after six months of declines amid the broader sell-off in risk assets.

    “As recent times have shown, bitcoin can drop in value,” ProShares CEO Michael Sapir said in a news release Monday. “BITI affords investors who believe that the price of bitcoin will drop with an opportunity to potentially profit or to hedge their cryptocurrency holdings. BITI enables investors to conveniently obtain short exposure to bitcoin through buying an ETF in a traditional brokerage account.”

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