Heres An Example Of Longing Cryptocurrency
Let us suppose you but 20 Etheruem coins at $2,000 each, investing a total of $40,000. Now, you expect the prices to grow, and as expected, the price increases to $2,500 per coin. Now you sell all your open positions and get a total return of $50,000, where you make a profit of nearly $10,000 . As we see above, in the long cryptocurrency strategy, you buy low, wait for market growth, and sell at a rising price.
On the other hand, as we discussed above, when you are shorting cryptocurrency, you expect the prices to drop so that you can buy the asset at a lower price. As we see, cryptos are sold at a high cost, waiting for market drop, and purchased at a lower price.
Shorting Via A Cryptocurrency Exchange
There are multiple exchanges on the market that help traders buy, hold and sell cryptocurrencies. If you are looking for crypto exchanges that allow shorting, you are in good luck. Many prominent exchanges offer short selling cryptocurrency options. Cryptocurrency shorting on Binance, Bitfinex, Kraken and many other exchanges is extremely easy, and you can start shorting cryptocurrency in just a few clicks.
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.
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What Are Some Of The Most Common Ways To Short Bitcoin Pricing
The most common way to short Bitcoin is by shorting its derivatives like futures and options. For example, you can use put options to bet against the cryptocurrency’s price. Contract for differences , in which you pocket the difference between an asset’s actual price and your expected price, is another way in which you can short Bitcoin pricing. Prediction markets are another avenue for shorting Bitcoin.
Going Short On Bitcoin And Cryptocurrencies
Those who think Bitcoin or an other cryptocurrency will go down, or want to hedge against a long position, can open a short position. Below we explain how to short Bitcoin and other cryptos.
First, lets quickly describe what shorting is and then we will move onto how to short ETH, BTC, ETC, etc .
TIP: Going to cash is the equivalent of shorting Bitcoin using Bitcoin at 1x, but without the fees. Meanwhile, shorting Bitcoin at 1x with Bitcoin is essentially the same as being in cash, but with fees. That is worth keeping in mind on exchanges that dont deal in cash or in situations where you cant short Bitcoin.
TIP: Check out BTCUSDSHORTS before you short crypto. If shorts are at a high , you might want to rethink shorting. If shorts are at a recent low and Bitcoins price is high, then think about what that means. Shorting adds another layer of complexity to crypto, navigate shorting carefully .
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How Does Shorting Bitcoin Works
The principle of shorting Bitcoin or any other tradable asset is straightforward. A trader needs to sell an asset they hold, to buy it back at a lower price. Now, if the asset that you sell is yours, you are not particularly making any money when you buy it back later.
However, if that asset is borrowed at a higher price and returned at a lower price, you get to keep the difference, which would be considered a profit.
There are several brokerage platforms that lend Bitcoin to speculators who wish to short the asset or some which facilitate peer-to-peer lending and borrowing. Others simply deal in derivatives, thereby circumventing the need for their customers to trade in the actual underlying assets.
As we will explain in later sections, there are several ways to short Bitcoin, depending on your risk profile and knowledge of the marketplace. These include margin trading, CFDs , options, futures trading, and investing in inverse leverage tokens.
Crypto beginners corner:
Are The Glory Days Of Bitcoin Over
Bitcoin has caught the notice of the mainstream financial press and the worlds biggest investors and major players in the investment world, not to mention everyday traders who have come to understand that trading in Bitcoin can be very lucrative.
One way to get in on the action is to buy Bitcoin and then hold on to it, waiting for it to increase in value. When it reaches a price you feel comfortable with, you can then sell it and then pocket the profit.
This was a more viable option many years ago, in the early days. Many Bitcoin millionaires were born in the early days. Take Erik Finman, who started investing in Bitcoin when it was just $12. Or take Barry Silbert, who bought 48,000 Bitcoins for $350 each in 2014 when the U.S. Marshals Service auctioned off the stash of Ross Ulbricht, the creator of the Dark Web site Silk Road.
To give you some perspective, if you had invested $1 in Bitcoin at the very beginning, it would be worth $2.5 million today. If you feel like you missed the boat with Bitcoin you can always invest in these other cryptocurrency alternatives to Bitcoin.
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Can I Margin Or Short With Cryptocurrency
Cryptocurrencies are non-marginable. This means that you cannot use leverage to buy them and orders are evaluated against non_marginable_buying_power.
Buying power is calculated as follows:
Non-Marginable Buying Power = Settled Cash – Pending Fills
Cryptocurrencies are not shortable. This also means that all cryptocurrency assets have 100% maintenance margin requirements.
Securely Store Your Recovery Phrase
When you create a new self-custody wallet, you’ll be given a recovery phrase that consists of 12 random words. The recovery phrase is the key to your crypto, meaning anyone with your recovery phrase has access to your crypto. Do not share your recovery phrase with anyone.
We strongly recommend writing these down on paper and storing them securely, as well as using Coinbase Wallet’s cloud backup feature.
Remember, do not share your recovery phrase with anyone. Coinbase will never ask you for your recovery phrase. And if you lose your recovery phrase, Coinbase cannot help you access your wallet.
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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.
How To Long/short Cryptocurrencies
A long/short investment strategy is usually associated with hedge funds, but a growing number of cryptocurrency owners are using the same approach to diversify their portfolio and increase their profits.
If you like the idea of making money when cryptocurrency prices go up and down, then this is a strategy you want to pay attention to.
In this guide, well be showing you how to long/short cryptocurrencies and what this can bring to your investment strategy.
First, lets start by explaining what a long/short strategy is in simple terms.
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Bybit Best For Day Traders
Supported cryptocurrencies to short on ByBit
As of writing this article, ByBit supports 4 cryptocurrencies to short-sell.
Here is the full list of available cryptocurrencies to short-sell on ByBit:
This is certainly not the longest list of coins in this review but there is something else thats special about ByBit.
You see, ByBit offers 50x leverage on all three altcoins and 100x leverage on Bitcoin.
There is a very nice leverage bar that you can adjust to your preferred level on the trading interfaces.
Here is an example from EOS leverage trading.
You simply drag the dot along the bar and your leverage is instantly changed.
Thats a very nice feature.
It makes it very easy to change the leverage on the go as you see the market change.
Sometimes the crypto market wont let you trade with 50x leverage and you need to either cut your position size, stop trading or reduce your leverage.
This tool comes in very handy when trading altcoins.
Short sell trading fees on ByBit
The fee for short-selling crypto on ByBit is 0.075%.
Here is a fee table with the leverage included.
Thats the lowest trading fee so far in this review.
And remember that this is the standard fee for trading.
There is no need to increase your monthly trading volume or anything.
You simply get on to the exchange and trade, thats it.
One more thing to mention about the trading fees for short-selling on ByBit is that you can get rebated here as well.
How to short crypto on ByBit Step by step guide
Prime Xbt Best For Advanced Traders
Supported cryptocurrencies to short on Prime XBT
Prime XBT supports short trading in 5 cryptocurrencies at the moment.
I think this list of coins will increase over time as this trading platform is steadily increasing in popularity.
As I mentioned before, to be able to short-sell crypto on an exchange, there has to be margin trading involved.
On Prime XBT you will enjoy up to 100x leverage on all cryptocurrencies:
These are some of the most popular coins on the market and they are providing high levels of leverage in all of them.
For some traders, I would not recommend trading with 100x leverage since it takes a lot of skill to manage entries.
Especially since the crypto market is so volatile. Its easy to get stopped out with tight risk limits.
However, if you are an experienced trader you will benefit greatly from this high level of leverage.
Once I learned how much leverage I was comfortable trading with I started making more steady gains while trading these altcoins.
Short sell trading fees on Prime XBT
The fee for short selling cryptocurrencies on Prime XBT is 0.05%
I wanted to show you the fees on every exchange for short-selling cryptocurrency.
Many people are asking, can you short-sell crypto with the same fees?
The answer is yes.
The fees dont change depending on which direction your trade is.
Lets take a look at the fee table for Prime XBT and I will explain.
Prime XBT has a 0.05% taker trading fee.
One thing to keep in mind though.
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Short Sellers Could Target Crypto Mining Stocks Next
Shorting specialists might not be focusing on top miners just yet, as those companies are, at least in theory, large enough to acquire fresh mining rigs and electricity sources relatively cheaply, bitcoin mining consultant Alejandro De La Torr told Blockworks.
It could put some public crypto miners in a better position than some of their smaller, unlisted counterparts, at least in the short term. Todd Esse, co-founder of bitcoin mining fund HashWorks, told Blockworks he expects shorters will target certain vulnerable mining stocks moving forward.
In any case, short interest a measure of how many outstanding shares are attributable for nearly all these stocks are now at yearly highs, according to data from finance and blockchain analytics startup quantX.
MicroStrategys short interest hit 30% in May , but has since dropped slightly. Signature Bank shorts have surged: Its short interest is up 60% month over month, now at 2.57 million shares of almost 63 million outstanding.
Pure bitcoin plays have slightly declined in short interest, whereas broader crypto plays have spiked this month, quantX co-founder Oisin Maher said. The short interest in cryptoasset manager Voyager Digitals US-listed equity, in particular, has exploded some 600% in June, while Galaxy Digitals has been steadily growing all year.
Coinbase short interest over the past year | Source: quantX via Bloomberg Terminal
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Get Started Short Selling Bitcoin
Were still in the early days of shorting Bitcoin. For years, in-the-know investors have been coming up with creative ways to profit by shorting Bitcoin.
But with futures contacts coming from big name institutions CME Group Inc., Cboe Global Markets Inc., and Nasdaq Inc., its set to get even easier to short the cryptocurrency. That means you can make money by betting on its decline, which many bearish market watchers say is inevitable.
With the volatility, you dont have to wait for a full-on bubble burst to profit. You can benefit from even relatively small declines in value, as well as the more extreme fluctuations in Bitcoin’s value.
As with any investment, learning how to short sell Bitcoin is not a walk in the park. It takes research and some willingness to take the risk. Most financial advisors would equate it with gambling…but if you play your cards right, you can benefit financially.
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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.
What Does Shorting Mean In Crypto
Shorting in crypto means borrowing an asset from exchange to sell at the current market price. The seller does this with the hope that the market price of the coin will drop. If that happens, they can repurchase the asset at a lower price, pay off the number of coins borrowed and retain the profit.
Heres what a simple Bitcoin short selling trade looks like:
- Borrow and short sell 2 BTC at a market price of $5,000 = $10,000 trade size
- Wait for the price of BTC to drop to $4,500
- Buy back 2 BTC at $4500 per coin, thus returning the 2 BTC you originally borrowed.
- Your profit will be the difference between the position size and the amount you spent in repurchasing the BTC.
- Hence we have $10,000 minus $9000 = $1,000 profit.
Although the above process may seem really simple, there is a complex underground setup powering the system that allows such trades.
For instance, traders may sometimes have to deposit a certain amount as collateral before they can open a position. This collateral is called margin and they could lose it if Bitcoin consistently goes up in price to a level that their collateral cannot cover potential losses.
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Heres Why Grand Theft Auto 6 Should Bring Cryptocurrency Into The Game
Rockstar Games dominated the gaming market from the 90s to 2022. However, the competition in the game sector is tenfold and threatens GTA from its top spot. Similar to how futuristic they were in the 90s, the game must be even the more futuristic for the next 20 years.
The future of the financial world could be cryptocurrency, and introducing it in GTA 6 could be a gamechanger.
For example: In a mission in Grand Theft Auto 5, Franklin helped Lester to manipulate the stock market. Grand Theft Auto 6 can do the same thing, but this time with cryptocurrency.
Cryptocurrency could be added as a story element in the games plot making the player earn multiple forms of income. Characters who are crypto billionaires can give missions that will be paid with cryptocurrency. Twenty years later , GTA 6 will be hailed as futuristic for bringing in cryptocurrency gameplay.
Heres A Similar Example For Cryptocurrency Shorting
Let us suppose you borrow 20 Etheruem coins and sell them at $2,000 each, receiving a total of $40,000. Now, you expect the prices to drop, and as expected, the price decreases to $1,800 per coin. Now you buy 20 coins at $1,800 each, spending $36,000, and return them to the original lender. You make a profit of nearly $4,000 .
One key thing to note when longing vs shorting cryptocurrency is that in the long strategy, the maximum loss you can incur is the assets price , while there is no limit to the profits in case the prices rise. However, in shorting cryptocurrency, the maximum profit you can generate is the assets price , while there is no limit to the losses if the prices rise.
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Crypto Taxation In The Us
The Internal Tax Revenue Service in the United States is bearing down on digital currencies and it has developed a taxing structure for the industry. It is important that potential or active investors in the United States know the basics of this structure to stay on the safe side.
The tax rate for cryptocurrency for federal taxes is the same as the capital gains tax rate. Majorly, there is a classification for cryptocurrency taxes as short-term and long-term capital gain taxes. The ratio is from 10 to 37% for short-term capital gain taxes and 0 to 20% for long-term capital gain taxes in 2021.
For short-term capital gains, the tax rate is measured based on the holding period. If you hold your crypto for less than 365 days, the IRS would classify it as ordinary income and therefore subject to the short-term capital gains tax.
The rates at which short-term capital gains are charged depending on the value of your crypto and the entity holding it. On the other hand, long-term capital gains are subject to tax once the crypto has been in the individual or collective possession for a period above 366 days. The tax rate is between 0-20 percent as the actual taxing begins from $40,401.
Your crypto also is subject to tax if you earn crypto interest from decentralized finance, earn airdrops, crypto payments, staking pools, and crypto mining. To learn more about cryptocurrency taxing in the US, visit the IRS FAQs section.