Monday, October 3, 2022

How To Short Crypto On Binance

Why Should I Short Sell Bitcoin

How to short crypto on binance

Figuring out if you should short sell bitcoin depends on your motives. Many traders short-sell bitcoin for numerous reasons, including the following:

  • Valuation. Investors who speculate that bitcoin is overvalued or exists in a price bubble may wait for a downward trend to start before shorting bitcoin. Traders who trade bitcoin based on valuation metrics predominantly follow a fundamental trading style, analysing the suspected intrinsic value of an asset against its market price.
  • Hedging risk. Some traders short assets to hedge the risk of their larger portfolio. For example, if you already hold bitcoin but you suspect it is due to fall in the short term, you may decide to open a position to short sell bitcoin. If you are correct, the profit from your short position can reduce or exceed your loss from your long position.
  • Scepticism. Some traders that short bitcoin expect cryptocurrencies to be a short-term trend and hold bearish sentiments towards the bitcoin market. These short-sellers tend to stay up to date with the latest bitcoin and blockchain advancements and not let opinions interfere with their objectivity.
  • Volatility. Evident from its history, the price of bitcoin can appreciate as quickly as it depreciates. Traders with a high-risk appetite are drawn to volatile assets that have the potential to reap huge rewards, or equally huge losses. However, whilst some traders rely on luck, others utilise a structured approach based on experience and knowledge.

How To Short Bitcoin: Conclusion

Shorting Bitcoin allows you to make profits by buying low and selling high. You should know the bitcoin market to speculate its direction. The timing is crucial. If you are right, you make profits else, you have to cover the losses. Bitcoin can be shorted using Bitcoin Exchanges, Options, Futures, CFD, Spread-betting, prediction markets, and leveraged tokens. They are high-risk trades and are recommended only for advanced traders.

What Is Shorting Bitcoin

Crypto shorting is the process of selling the cryptocurrency with the hope that when its value falls, you can buy it back at a lower price. This way traders earn the profit of difference in the market price. In other words, it is an investment method to earn money over a digital currencys price drop.

Buy low and sell high! Basically, you borrow the coins with the commitment to return them sometimes later. Then, you sell the coins at the current market price, knowing that the price will decrease in the near future. And when the price goes down, you buy the coins back and return them to the lender. Now, what you earn as profit is the difference between the selling price and the price at which you bought them back.

On the other hand, the price difference can be a profit or loss. Therefore, you place short positions only when you are sure that the asset price will fall for sure. That is why there is quite a lot of chances of making huge profits in this highly volatile market, especially, in digital currencies such as Bitcoin.

Also Check: Which Crypto To Buy 2021

Short Cryptocurrencies Via Cfds Derivative Trading

The drawbacks of traditional short-selling have created a growing interest in derivative products as an alternative method of short-selling bitcoin. Derivatives are financial instruments that take their price from the underlying market, in this case, bitcoin.

With this approach, there is no need for you to borrow coins from a third party, as you are simply speculating on the future direction of the market. A popular derivative is CFDs:

CFDs are an agreement to exchange the difference in the price of a bitcoin from when the position is opened to when it is closed. You would open a position to sell a bitcoin if you believed it was going to decline in price.

However, there are still two parties involved the trader and the broker. At the end of the contract, the two parties exchange the difference between the price of the cryptocurrency at the time they entered into the contract and the price of the cryptocurrency at the end.

Essentially, the trader is paying the difference between the opening and closing price of the cryptocurrency they are trading. The simplicity of entering and exiting positions, compared to other trading vehicles, is just another reason why short-selling cryptocurrency CFDs are very popular.

Best Ways To Start Shorting Crypto

How to short crypto on binance

Shorting crypto is one of the popular methods of investment that helps you to receive profit from drops in the price of a certain asset. The cryptocurrency market is considered one of the most volatile. On the one hand, this is a disadvantage for investors, and on the other hand, traders generate money in this way.

There are a huge number of ways to make a profit in the cryptocurrency market. Some cryptocurrency investors or traders use technical analysis, while others will make an investment in companies and projects by using fundamental analysis. Thus, as a trader or investor, you also have many different options for creating a profitable trading strategy.

Shorting cryptocurrency is one of the popular methods of investment that helps you to receive profit As is the case with stock exchanges, the most popular and common behavior model among cryptocurrency traders is buying coins at a low price. This is how most traders act. Surely it is easier and less costly to buy a currency at a low price and wait for its growth. But no single coin has shown only an increase without a fall, so a cryptocurrency trader must know how to enter a short position. Thus, we decided to provide you with information on how to short crypto and make money on it, as well as what you should pay attention to.

Read Also: What Is The Best Time To Buy Cryptocurrency

Sell All Your Btc Coins

Close the Order. Once you see BTC price dropped hard enough compared to a paired coin, you click Close order to get it out of the market.

Take into account Binance fees if you are not using BNB as they take away a portion of your profits. They range from 0.012% to 0.10%, depending on the volume of the order and the verification tier you have achieved.

A List Of Different Ways To Short Bitcoin And Other Cryptos

: A few major exchanges including Kraken will allow you to short sell Bitcoin on margin either using leverage or not without being accredited. Here you are borrowing a given crypto at the current market price and selling it, and then you are buying it back later to cover your position. This costs a fee and is subject to borrowing limits. You can do this on Kraken under advanced settings by selecting sell and then settle position and on Poloniex, which are both U.S. exchanges that generally comply with the law in most states, and on Bitfinex, which uses Tether and operates outside of the U.S. See: Kraken short selling and Poloniex short selling.

Options on Bitcoin Futures Contracts on the Stock Market: Anyone in any state can buy CBOE Bitcoin futures contracts or CME Bitcoin futures contracts. To short a futures contract you have to buy a call or put options on that contract. You do this through your broker and can use leverage. See: .

Futures Contracts on Bitmex: Your last real option for shorting crypto, Bitmex, lives in a grey area. U.S. citizens cant technically use Bitmex, but many do anyway using a VPN. Bitmex offers highly leveraged short contracts settled in BTC. All you do is pick the contract type and leverage, fund it, and hit go. See: trading on BitMEX.

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Ways To Short Bitcoin

There are 5 the most famous ways to short BTC:

    This is one of the most popular ways to short bitcoin. Many cryptocurrency exchanges, including Binance, allow for shorting BTC through margin trading. With margin trades, investors borrow money from a broker for making a trade. When the price will decrease, the borrower can buy back the BTCs and return the exact borrowed amount to the lender and keep the profit earned between the sale and purchase prices.

    However, its important to remember that there may be a leverage factor, which could either increase your profits or your losses.

    • Futures Market

    Bitcoin like other assets has a futures market. When a buyer agrees to buy an asset with a contract that defines at what price the asset will be sold at a later date, it is called Futures Trade. When you buy the BTC futures contract, you assume a short position . So, later on, when the price will increase, you can buy BTC at the prefixed price only which will be less than the current market price. This makes sure that you will earn a good profit on the asset in the future.

    However, if you sell a futures contract, it suggests a bearish mindset and a prediction that bitcoin will decline in price. So, when the price will go down in the future, you can sell the coins at the prefixed rate of Bitcoin .

    • Binary Options Trading

    The call option contract enables traders to buy an asset at a future date and the put option allows for selling the asset at future date.

    • Prediction Markets

    What Does Shorting Cryptocurrency Mean

    How to Short Crypto on Binance (Step By Step)

    Shorting crypto is a strategy that a trader uses with the aim to get a profit from the falling prices in the market, and this strategy of crypto trading is called short.

    The main feature of this trading strategy is its fast expiration. Market participants who open trades of this type are called bears. They got this name due to the fact that they begin to short cryptocurrency during the bear market.

    Bear market means dropping prices in the crypto market.

    In other words, a short position is a short and fast leveraged trade. The implementation of this trading strategy is general for any digital coin and looks like this:

  • The trader conducts a fundamental analysis of the cryptocurrency market and chooses the digital coin, the price of which should fall in the near future. The reasons for the falling price of cryptocurrency may be different: negative news, a problematic situation around this type of digital coin, or general economic situation.
  • Then the trader gets a loan from the exchange for a certain value of the coin that will be suitable for him. After a trader has borrowed the cryptocurrency, he must pay fees to exchanges for their services.
  • The trader sells the coin while its cost is still at its peak.
  • After that, it is necessary to wait until the price of a certain cryptocurrency declines and purchase it back, but significantly cheaper. The next step will be to repay the exchange and earn profits from the difference.
  • How does short-selling in cryptocurrency work?

    Also Check: How Much Money Is In Crypto

    Beginners Guide To Short Selling

    Short selling and long selling are terms used to describe different positions one can take on the derivatives trading market. Derivatives trading involves a set of financial contracts whose price depends on the underlying asset class.

    Shorting or short selling is a trading strategy where you bet on the price fall of an asset. The idea is to trade borrowed funds or make a contract to trade funds in the future for a lower price. If the price falls per your prediction, youll end up scoring a profit.

    In what follows, well explain the different ways of shorting cryptocurrency using the trading features available on Binance as an example.

    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.

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    Betting And Prediction Markets

    Prediction Markets Business research is another way to consider bitcoin shortcuts. They have not been in the blockchain world for a long time, but they can be an advantage for currencies, including bitcoin. Such markets allow participants to create an event based on the results. So, you might forecast that Bitcoin will decline by a certain percentage of margin, and if anyone takes you up on the bet, you will be able to profit. Predictable is an indicator of a bitcoin prediction market. There are several popular prediction markets online today: Bet Moose, Weathbet, Fairlay, etc.

    What Is A Bitcoin Short Squeeze

    Can You Short Crypto On Binance

    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.

    Also Check: How Much Are Crypto Taxes

    Seven Ways To Short Bitcoin

    For those investors who believe that Bitcoin is likely to crash at some point in the future, shorting the currency might be a good option. The number of venues and ways in which you can short Bitcoin has multiplied with the cryptocurrency’s increasing spotlight in mainstream finance. Here are some ways that you can go about shorting Bitcoin.

    Benefits And Potential Risks Of Trading Futures

    One of the biggest benefits of trading futures is that you are able to speculate on the price of assets and open positions accordingly. If the price of an asset does increase, then you stand to make a profit. This can prove to be a helpful strategy in highly-volatile markets such as that cryptocurrencies.

    However, there is a flip side as well. Futures requires the use of margin. And if you use margin, then you can potentially make much higher returns off of your initial capital. And you can lose the same huge amount of capital as well. That is why it is often recommended that futures should only be traded by those who have a much-informed understanding of the market that they are trading in. Now that we have covered what futures trading is and what its benefits and potential risks are, lets dive deep into understanding how we can trade futures on Binance.

    Recommended Reading: How To Make Millions From Cryptocurrency

    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.
  • Knowledge Of Order Types Is A Must


    Before you undertake a short position in Bitcoin, you should brush up on your knowledge of different order types. They can help limit losses if the price trajectory does not go in the direction that you bet initially. For example, using stop-limit orders while trading derivatives can curtail your losses.

    Recommended Reading: How Much Is 14 Bitcoin Worth

    How To Close Positions On Binance

    You can close your positions on Binance by clicking the close position button and entering a limit price or using the market price option.

    You can also close your open position by entering an opposite order. For example, if you have a short position, you need to enter a buy/long order to close your position.

    How Does A Short Work

    Basically, shorting works by allowing you to borrow an asset, such as Bitcoins, and sell it at its current price. Later on, you purchase the Bitcoins to pay back the person or company you borrowed them from.

    Hopefully, when you go to repurchase the Bitcoins, prices will have dropped, so it will be cheaper to purchase the assets that need to be paid back.

    Lets illustrate this with a short example:

    • You short sell 10 Bitcoins when the price is $4,000
    • This means you borrow 10 Bitcoins and sell them for $40,000
    • Price of Bitcoin drops to $3,500
    • You repurchase 10 Bitcoins to give back to the agency you borrowed from at 10*$3,500 = $35,000
    • Your total profit is $40,000-$35,000 = $5,000

    Read Also: How To Withdraw Bitcoins To Cash

    Long Vs Short Position In Investment Strategy

    The majority believes that the word Long implies long-term opening positions and that the word Short is opening short-term deals. But this is entirely wrong. People use long strategy when they want to buy crypto money, so long is always about buying assets.

    That is, in other words, long is a strategy in which the trader opens positions to buy a crypt, counting on the growth of its market value. This means that in the case of the BTC/LTC pair when we have Bitcoin, the trader or bot looks at when it is possible to enter the position itself. And as soon as it passes through, it goes into it and waits for the rate to go up, for the BTC to LTC to grow, and then it can be sold.

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