In the past couple of years, no one thought about shorting bitcoin and much less, how to short bitcoin. In the present time, investors can short-sell bitcoin just like any other asset. Shorting bitcoin is another way of investing in bitcoin where an investor borrows some amount of bitcoin at a current price and sells at the same price, with an anticipation of a future fall in the price which will enable him to pay back at a lower price.
– Study the market trend of the asset – Be sure the price is going to fall so you don’t lose money – Chose a trading agency – Study the regulations guiding their service – Indicate your interest in a short sell – Do not stake so much money to avoid a huge loss.
#1 Direct Short Selling of Owned Asset You can decide to sell off your already existing digital asset at your discretion, maybe in anticipation of a future fall in price. This is the simplest and less risky way of shorting bitcoin, you hope that the value of your asset would soon appreciate, and if you sell, you will be able to buy more BTC when the price falls.
#2 Margin Trading of Bitcoin This is a method that allows investors to sell bitcoin they don’t own, this can be done on a margin trading platform that allows this kind of trading in cryptocurrency. This platform allows investors to borrow some BTC from a broker to make a trade, with the hope that the price will fall and he makes gains. This is the best way to start a short sell, but it is also important to know that the leverage could increase or reduce your profit.
#3 Short Selling on Future Market Every Investment instrument has a future market, just as bitcoin also has, this platform allows a future trade which enables a buyer to agree to buy bitcoin at a future date at a fixed price. The buyer purchases this contract with the hope that the price will rise and the buyer will get a deal on the asset.
#4 Binary Options Trading This is another way of shorting bitcoin, it involves “put” and “call” options. The put option contract allows you to have a specific amount of bitcoin you have already set at a certain price at a certain time. This means that you hope to sell bitcoin at the present price even if the price drops later. The set price is called the strike price, so the put price gains value even as the bitcoin price goes lower than the strike price.
#5 Shorting Bitcoin on CFD Platform The abbreviation CFD means ‘’Contract for Difference” this allows an investor to agree to pay only the difference in price, instead of borrowing the bitcoin, selling and buying back at a lower price. Though CFD functions just like futures contracts, it is basically for retail investors.
#6 Shorting Bitcoin Tracker Fund Investors can short bitcoin using exchange-traded notes, this option is also available to institutional investors. These notes come in two currencies, EUR or USD denomination, bitcoin Exchange-Traded Notes, which could be found on platforms like Stockholm-based Nasdaq OMX exchange. This method can only be available to US-based accredited or institutional investors who can short the Bitcoin Investment Trust (GBTC).
Start with an accredited exchange, trading agency or broker, register an account and indicate an interest to short sell. Ensure to study the regulations carefully.