Currently, the price of Bitcoin is hovering around USD 9,000 and while some traders are expecting a “bull run”, others foresee a decline in value. For these people looking to speculate on a fall in prices, they can make money by using a “shorting” strategy. With this approach, traders aim to profit from an asset’s decrease in value instead of benefitting from increases like traditional trading methods. Back in late December 2017, traders could have made a great profit by successfully going short on Bitcoin when the market crashed. At that time, though, there weren’t many ways to do this effectively. Fortunately, today, with numerous good options, people can capitalize on any downturns in the world’s most popular cryptocurrency. For more information you can visit Reasonable Digital Wallet
Investing in a volatile financial product like Bitcoin can be highly risky due to its unlimited potential for loss. As there is no limit on how much the price of Bitcoin could rise, investors need to manage their risk if they choose to short it. In this article, we’ll explore how shorting can help you become successful when predicting market drop-offs.
Which Ways Can Help You To Short Bitcoin?
If you want to benefit from a declining Bitcoin price, there is no shortage of options. Many crypto exchanges now support short selling and offer Bitcoin-linked derivatives. We’ll take a look at some of these ways so that you can find one that works for your needs.
Bitcoin CFD Brokers
The increasing prevalence of cryptocurrencies has provided numerous CFD brokers with the opportunity to offer Bitcoin contracts. These Contracts For Difference (CFD) are established and managed in fiat currencies, so you must fund your account through traditional currency. Additionally, as CFDs are derivatives, this implies trading on a financial instrument that lacks any form of BTC backing. Opening a CFD trading account is an easy process with most brokers, and requires minimum deposits. It generally takes no more than one day to complete the entire setup process and you can get started with as little as a few hundred dollars. With such convenience at hand, short positions are only a deposit away. When trading derivatives, it’s important to be aware of the financing rate.
When using traditional CFDs to go “short” on Bitcoin, you will have to pay a percentage fee for your position to stay open. Make sure you understand this concept before proceeding with any crypto trades. If the financing rate is unfavourable, it may be worth looking for alternative options if you’re expecting to maintain your Bitcoin short position beyond a few days. Entering the crypto realm holds the key to accessing more reasonable exchanges with better rates; however, you will need to evaluate them and decide which one best fits your needs.
Crypto CFD Brokers
Cryptocurrency traders who are looking to take advantage of short positions in Bitcoin can use a platform like Bitmex. This exchange functions similarly to existing fiat currency CFD brokers but with improved terms for crypto short sellers, accepting only Bitcoin deposits and withdrawals. With Bitmex, traders have greater access to the potential profits from fluctuations in cryptos such as Bitcoin.
On Bitmex, short-sellers have the opportunity to make money by being paid daily for having sold Bitcoin. There are various types of ways to achieve this, such as perpetual contracts with no expiration date and futures contracts that will expire at a chosen date. For those with some Bitcoin in their portfolios, opting for an exchange like Bitmex or Deribit to short-sell is a better choice than going through fiat CFD brokers, as the terms offered are more favourable.
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