5 Ways To Short Bitcoin (BTC)
Bitcoin is undoubtedly the biggest digital asset in the crypto market, but its entrance into the financial industry back in 2009 drew little attention.
Despite Bitcoin pioneering the cryptocurrency move, critics still believe that there is no place for Bitcoin in the promising future of cryptocurrencies.
The highly volatile nature of cryptocurrencies, Bitcoin inclusive has made shorting the digital asset a welcome idea.
In fact, nearly every currency and commodity have these markets, which create liquidity. More liquidity results from a more developed and mature market.
To short Bitcoin means to sell the cryptocurrency (without necessarily owning it) with the goal of profiting as the price goes down.
For investors looking to benefit from a drop in the price of Bitcoin, here are some ways you could use to short the leading cryptocurrency currently valued above $6,000 USD per coin.
Predicting a drop in price
This is by far considered the simplest and the most efficient method of shorting Bitcoin by most investors. Although, this requires holding Bitcoin, to begin with.
An investor seeing the price sore above ‘normal’ levels, could take advantage of the volatility by selling. One can then close their trade and buy back more coins or walk away with a profit.
It is a simple case of buying when no one wants to buy and selling when people are willing to pay more for the item, in this case, Bitcoin.
Bitcoin Margin Trading
Bitcoin margin trading is one of the most common methods of shorting the digital asset. Brokers lend the cryptocurrency to the investor to make trades (short-term or long-term).
Margin traders can also benefit from leverage (borrowing money), therefore amplifying the results of their trade.
At the end of the stipulated time, the investor pays back the amount borrowed with an interest (in some cases), what is left of the profit belongs to the investor.
A major let down is that margin trading involves high risks as collaterals have to be kept before borrowing Bitcoins for trade.
Bitcoin Exchange Trade Notes (ENT)
Investors looking to make quick profits from Bitcoin can also indirectly bet against Bitcoin using ENTS.
Investors can short not only Bitcoin but almost every cryptocurrency using this method.
Investors choose the digital asset (Bitcoin) and bet against a price hike or a fall of the asset. The most popular Grayscale used in shorting Bitcoin is the Bitcoin Investment Trust.
Applying Contracts for Difference (CDF)
CDF is another great way of shorting Bitcoin. Contracts for Difference generally mirror the movement of Bitcoin in the market.
The client and the broker come into terms predicting the price rise or fall of Bitcoin. The broker then settles then settles the client at the end of the contract date, if their predictions are on point.
Cryptocurrency Prediction Markets
This method of shorting Bitcoin is one of the most recent, and as such has not received much traction.
An investor predicts the margin Bitcoin (or another cryptocurrency) will rise and fall over a period of time, another investor takes up the bet.
If the prediction comes to pass, the investor who predicted the price margin makes a quick profit. Predictious is a platform that offers this.
Shorting Bitcoin is a Risk
While shorting Bitcoin may be a great idea for making a profit, there are no rules that guide the process for certain success, this is due to the highly volatile nature of the crypto market; its either you win big or lose big.
However, some individuals still consider short selling Bitcoin a means of rising wealth.
Bitcoin’s (BTC) Current Market Status
Over the last two days, Bitcoin has fought off the devaluing effects of the bears.
Yesterday, June 29, Bitcoin traded for as low as $5,835.75 however, the digital asset is currently valued at $6,371.56 owing to a sharp price hike of 7.7.9% over the last 24 hours.