Learn more about how to short Bitcoin in this post. In a nutshell, this article is a step-by-step tutorial focused to brainstorming crypto enthusiasts, particularly beginners, about how easy it is to short sell the leading crypto Bitcoin.
Also, shorting Bitcoin is considered to be a good trading option for all investors who think that BTCUSD would experience an over drop in price in the future.
However, be mindful that everything discussed in this how to short Bitcoin article is based on our own research and observations. So, please, never take this article as your financial advisor. Instead, doing your own research before investing your hard-earned money to short sell Bitcoin would be a good one. Our main goal is to only explain and educate you on how to short Bitcoin.
Without further delay, let me quickly explain to you what shorting Bitcoin (BTC) means in general in the digital finance world.
Shorting Bitcoin is a crypto investment strategy that helps investors to make a profit from an asset whenever its price drops. On the other hand, shorting Bitcoin (BTC) can also be called short selling within the crypto mainstream finance glossary.
Understand shorting Bitcoin in this angle. Anytime you short Bitcoin, its main goal behind it is to sell the asset when its price is high and then purchase it again whenever the price decreases. In particular, this looks similar to how traders target buying low and selling when the price is high.
Moreover, when shorting Bitcoin, traders turn to use different analyses and techniques that are friendly and can benefit them. In this way, the traders’ techniques often differ due to the type of analysis they usually bring onboard. Time frames and risk involved in shorting Bitcoin is also a major factor.
At this time, traders primarily decide to use technical or fundamental analysis strategies. It is worth mentioning that shorting Bitcoin can help supercharge your crypto portfolio in the world of digital finance. Here, if both techniques are required, traders sometimes blend the two.
Upon using the technical analysis method to short Bitcoin, traders specifically review Bitcoin price chart history. They occasionally do this by tracing past trends using technical indicators.
Prioritizing moving average indicators minimize the outstanding Bitcoin volatility price history into a simple trend line. Moreover, the moving average indicators mostly include Bollinger Bands, SMA, and MACD. Therefore, these tools are good instruments for technical analysis.
In brief, the MACD indicator helps to interpret the strength and momentum of a trend. For example, by using the Bollinger Band, you can see if an asset is overbought or oversold and vice versa.
In addition, using support and resistance or trading and chart pattern strategies for technical analysis when shorting Bitcoin can also be a good option. In this case, both strategies may have their own advantages and downsides.
As mentioned above, both the support and resistance levels could be easy to do. But they can be less effective when the market rises or declines. Conversely, the chart pattern sometimes turns out to be hard to identify.
Traders mostly consider Bitcoin as a digital tool that has no ‘fundamentals’ in its operations. This is because the Bitcoin market looks relatively young which lacks historical value in terms of other assets. With this said, many suggest that Bitcoin must be traded based on technical analysis only. This could be partially true.
Never mind, either way, you can short Bitcoin using fundamental analysis anytime. The choice is yours. We don’t decide for you.
In short, shorting Bitcoin works specifically in a simple way. It generally enables traders to simply lend crypto assets like Bitcoin from a trading agency or a person and trade at its current price quotation. By doing this, you can then buy the Bitcoin to pay back the borrowed bitcoins in the later days.
At this time, if you hopefully like to purchase the Bitcoin back, its price would not be the same. Instead, it will automatically drop or increase in price so you purchase to pay back. On the other hand, if the price declines, you may buy it at a cheaper price. Either way, if the price increases, it can be more expensive for you.
We are here to do everything for you to understand how to short Bitcoin in a simple way. Continue reading for more explanation. Let us demonstrate briefly with an example.
Let’s say that you shorted 8 Bitcoins when its price was trading at $4,000. This simply means that you borrowed 8 Bitcoins and sold them for $32,000 at that time.
After this, if the Bitcoin price drops drastically from $4,000 to $3,500. Base on this current price, if you want to pay back the borrowed Bitcoin, you will only buy it at 8*$3,500 = $28,000. Finally, your total income will be calculated as $32,000-$28,000 = $4,000. Hopefully, you find this example helpful?
Note that, the agency or the person who loans the Bitcoin to you can call for the asset anytime he wishes. Also, they are supposed to only give you short notice. For this reason, we strongly advise that before shorting Bitcoin, consider reading to understand any rules, guidelines, and all the possible regulations that cover any assets you short sell.
In some cases, possible fluctuations in the market such as high rate and cost swings can expose traders to possible risks. In fact, shorting Bitcoin can be hefty and riskier if you have shallow knowledge about how to do it. Furthermore, it is also risky if the lender calls for the loaned asset before its price drop.
There are many different platforms where you can successfully short Bitcoin. Each of them has its own threshold of risks, rewards, and complexity associated. You can quickly short sell Bitcoin on most major Bitcoin exchanges like Bitmex, Bitfinex, Kraken, and Binance.
On the other hand, you can also short bitcoins via other crypto platforms like Bitcoin options, Bitcoin futures, and a Leveraged bitcoin trading provider.
- High-profit potential
- Limited capital required
- Multiple margin trading platforms
- Unlimited losses
- Margin interest
- Short squeezes
Yes! With gender equality, anyone can short Bitcoin more like the other financial instruments no matter your whereabouts. In terms of trading, Bitcoin is always available to sell and go short at any given time. Here, shorting Bitcoin can be worth doing.
At the same time, it could also be a somewhat hefty and complex process. However, the complex process could mainly depend on whether you want to short using a crypto exchange or leveraged trading provider.
There are many prominent crypto platforms that you can easily use as a trader to short Bitcoin. As we have already mentioned above, more exchanges including Binance, Coinbase, Kraken, Bitfinex, and more others can be used to short Bitcoin.
As you begin to use it, you can stick to one of the exchanges that appears engaging and user-friendly to you. Also, knowing the rules and the regulations governing each of the exchanges before shorting Bitcoin with them is worth a thing.
The short answer to the question “Is Shorting Bitcoin Illegal”? is “No”. Shorting Bitcoin is not illegal. No one gets penalized for shorting or knowing how to short Bitcoin. Via the crypto market, anyone can short Bitcoin as soon as you have what it takes to do and also abide by rules and regulations. In doing this, you will know how to short Bitcoin.
By reading this hands-on guide about how to short Bitcoin, are you happy to short Bitcoin now? Hopefully, I know your answer is yes. If so, then we strongly advise that you read over this short Bitcoin article for deeper knowledge.
Also, know that shorting Bitcoin is a great financial move. But it is also a risky way to make money, through borrowing Bitcoins and trading them when their current price skyrocket. Traders can make money even when the crypto market is bleeding.
Honestly, shorting Bitcoin is not well recommended to crypto amateurs. If you are planning to short Bitcoin, remember to invest what you can afford to lose. Moreover, to shorten well, you need to be relevant to the latest events in crypto to catch up with asset price prediction.