HOW TO SHORT BITCOINS

WHAT IS SHORT SELLING

The Concept Of Short Selling Could Be Misunderstood In The Financial Markets. In Cryptocurrency Terms, Short Selling Or Shorting Is A Process By Which You Can Get Returns For An Investment Made When The Price Of A Cryptocurrency Drops. This Process Involves Borrowing Digital Currencies Such As Bitcoins And Selling Them Right Away At The Current Price. The Goal Of This Process Is To Wait Till The Price Of The Cryptocurrency Drops, So It Will Be Repurchased At A Lower Price And Paid Back To The Entity You Borrowed Them From.

If The Price Of The Digital Asset Drops, Then The Cost Of Repaying Your Debt Will Be Less Than The Initial Cost You Got The Cryptocurrency, However, If The Price Increases, Then You Will Suffer A Loss While Repaying Your Debt. For Investors Who Believe The Price Of A Cryptocurrency Is Likely To Drop Then Short Selling Is The Right Option.

3 WAYS TO SHORT BITCOIN

The First Step Involved In Bitcoin Shorting Is To Open An Account On A Trading Agency Or Platform, And Then Placing A Short Sell Order On That Platform. The Agency Recognizes The Short Sell Order And Sells The Requested Bitcoins From Their Supply, Expecting To Receive The Same Number Of Bitcoins In The Future.

While Opting For The Short-Selling Option, You Must Read The Rules And Regulations Guiding Any Asset You Intend To Short Sell. This Is Essential Because The Person Or Company Who Loaned You The Tokens Can Request Them At Any Time With Short Notice.

HERE ARE 3 WAYS TO SHORT BITCOIN

CFD Short Selling

CFD Is An Abbreviation For Contract For Difference. CFD Doesn’t Necessarily Involve Buying And Selling Real Bitcoins, But Trading On Contracts Whose Value, Is Derived From The Value Of The Coin. In Simpler Terms, It Is A Method Of Short Selling By Which The Difference Or Profit Is Paid Instead Of Repurchasing The Coin At A Lower Price.

With CFDs The Inconveniences Experienced In The Traditional System Are Eliminated As The Process Of Buying Back The Coin Is Avoided. It Is The Simplest And Quickest Method To Short Bitcoins And Other Popular Cryptocurrencies. Several Online Platforms Such As EToro And Plus500 Offer CFD Options For Bitcoin Short Trading.

Short Selling via Cryptocurrency Exchange

Popular Crypto Exchanges Are Now Allowing The Short-Selling Of Bitcoin And Other Cryptocurrencies. In Some Cases, Some Exchanges Also Allow The Concept Of Leverage Selling, By Which An Exchange Loan You More Funds Than You Own To Perform Transactions. For Example, An Exchange Can Leverage You On 1:3 For An Initial Deposit Of $2,000, Granting You $6,000 For Trading.

Leveraging Increases The Volume Of Losses Or Gains From Trade. It May Be Risky If Your Position Is Closed Sooner Than Expected By The Exchange. Platforms Such As Bitmex And BaseFEX Are Trusted Exchanges For Short Selling.

Prediction markets

This Is A Relatively New Concept For Shorting Bitcoin In The Cryptocurrency Industry. It Involves Creating An Event For Traders To Gamble On Its Outcome. It Is A Way Of Predicting The Direction Of Price Movements, Percentage Of The Movement, And Many Other Factors. It Usually Involves Two Or More Parties Countering Each Other’s Positions And Predictions.

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CONCLUSION

Short Selling Is Not Advisable For Amateur Traders As The Volatility Of The Markets Limits Their Chances Of Getting Returns, Which Puts Their Resources At Risk. Short Selling Is Very Common In Stock Trading Which Employs A Similar Ideology Of Shorting In Cryptocurrency Trading.