5 Ways to Short Bitcoin in 2024 Complete Guide

One of the advantages of using binary options trading over futures is that you can limit your losses by choosing not to sell your put options. Thus, your losses are limited to the price you paid for the put options. But what if you’re confident that an asset will actually decrease in value? There’s still a way to capitalize on your convictions and it’s called “short selling.” Short sellers want their target asset price  to fall to zero—that’s how they make money.

1. Similarly, when you take leverage (also a type of loan), you are required to deposit some amount as collateral.
2. Some of the best cryptocurrency exchanges for shorting Bitcoin include Binance, Kraken, and KuCoin.
3. The platform also provides a $100,000 demo account that lets you practice trading without risking real money.
4. So, if you use a CFD to short crypto, you’re taking the position that crypto prices will decline.
5. In late 2021, Bitcoin reached its previous all-time high of just over $69,000.

There may be an opportunity to capitalize on bad news through short selling. As of this writing, Bitcoin is in a downtrend, having fallen from over $73,000 to just above $67,000. A well-timed short trade would have captured more than 8% in gains without leverage while the rest of the market rode the price down. While one of the easier ways to short Bitcoin, CFDs (Contracts for Difference) are one of the more controversial ways to trade.

Is Shorting Bitcoin Halal?

Bitcoin futures can be purchased or traded on popular exchanges like Kraken or BitMEX and can also be found at popular brokerages such as eToro and TD Ameritrade. Since there’s no upper cap on any asset’s cryptocurrency/ cryptocurrency price, there’s theoretically no limit to how much short sellers can lose. If cryptocurrencies double, triple, or quadruple in value, short sellers stand to lose more than 100% of their position.

Futures trading

Prediction markets in crypto are similar to those in mainstream markets. CFDs are a relatively new way to short Bitcoin, and they can be a more affordable and accessible way to do so than other methods. However, it is important to remember that CFDs are leveraged products, which means that you could lose more money than you invest. Deposit the required collateral, often in USDT or BUSD, to initiate a short position. Please note that the availability of the products and services on the Crypto.com App is subject to jurisdictional limitations.

Let’s take the example of a trade on 6 May 2023 (denoted by the white vertical line). A contract for differences is settled in fiat, so you don’t need to worry about owning or storing Bitcoin. Coinbase began offering Nano Bitcoin Futures trading on June 27, 2022.

For the sake of simplicity, we ignore the effect of margin and leverage. Shorting can also be done via derivative contracts, such as futures and options. Derivative contracts allow the trader to gain exposure to the price movement of an underlying asset (e.g., Bitcoin) without having to actually own it. The short seller covers the position by buying the asset back sometime later, and if it is at a lower price than what they initially sold it for, they pocket the difference.

Whether short selling is ethical or not depends on the trader’s intent and due diligence. It is essential to ensure you are engaging in legal activities when short selling. Yet do note that cryptocurrency markets are highly volatile, and investors should exercise caution when making risky trades. Say, you bought back the assets when the current price is at $1,000 per WETH. You have now repaid all your debt (of 10 WETH now worth $10,000) and pocketed the difference as profit, i.e., $10,000.

Several exchange-traded products and strategies are available for shorting Bitcoin. Before you begin, it helps to learn about order types and to practice your strategies. There are several leading Bitcoin trading platforms, such as Deribit and OKEx, that are not available to American investors due to regulatory compliance issues. You can also trade perpetual Bitcoin futures on platforms like BitMEX if you have access to them. Perpetual futures do not have closing dates, allowing traders to set and forget positions or not have to worry about rolling them.

Bitcoin CFDs

Until January 2024, the only exchange-traded product available to U.S. residents was ProShares’ Short Bitcoin Strategy ETF (BITI). That month, the Securities and Exchange Commission approved 11 Spot Bitcoin ETPs that can be used for shorting Bitcoin. unreal engine game development Bitcoin futures trading took off around the run-up in cryptocurrency prices at the end of 2017. You can short Bitcoin futures at the Chicago Mercantile Exchange (CME), the world’s biggest derivatives trading platform, and on cryptocurrency exchanges.

Using a contract for difference (CFD) is a more advanced method of shorting. The contract pays the difference between an open and closing price on an underlying asset. Depending on your position, a higher price on the close date could net you a profit, and vice versa.

Short sellers are investors who bet on the price of an asset to plummet. Yes, cryptocurrencies can be shorted on several exchanges, including Binance, KuCoin, Bybit, and OKX. This sudden increase in price can be due to several factors, including rapid positive news about the asset or even market manipulation by whales.

Many crypto exchanges, such as Kraken and Binance, offer margin trading services, but each has unique fee schedules and minimum account requirements. Traders must review their exchange’s specific best cryptocurrency exchange 2021 reviews terms and conditions when developing their short selling strategy. As their name implies, “short sellers” sell cryptocurrency as an opening trade and hope to rebuy these coins at a lower price.

All examples listed in this article are for informational purposes only. You should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained herein shall constitute a solicitation, recommendation, endorsement, or offer by Crypto.com to invest, buy, or sell any coins, tokens, or other crypto assets.

Real World Assets (RWAs) in crypto have a long history, but have experienced a meteoric rise as of late. For simplicity of calculations, we have assumed there is no interest on the borrowed amount. Say the current price of 1 WETH is $2,000, and you want to borrow 10 WETH.

While Bitcoin has recovered and even set new all-time highs since that crash, resistance at the previous all-time highs is proving difficult to break through convincingly. If you expect a larger pullback before BTC makes another try for new all-time highs, you might consider shorting at resistance. Shorting crypto is the opposite of going long – a trader should short when they expect a currency to decrease in value, and go long when they expect the coin to increase in value. A short sell order is an order that speculates on the decrease in the price of an asset.

In such cases, you will receive a margin call, which means you need to provide additional collateral or close your position. What if there was a way to churn profits even when prices are plummeting? Before undertaking a short position in Bitcoin, you should brush up on your knowledge of different order types. Price is just one of several risks you will have to evaluate while shorting the cryptocurrency. Therefore, there isn’t sufficient data or information for investors to make an educated decision about its workings or feasibility as an asset. CFDs have a more flexible settlement tenure than Bitcoin futures, which have predetermined settlement dates.