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Where to Short Bitcoin – Practical Examples

12.08.2020

Are you looking to increase your trading skills? Shorting bitcoin might be a suitable tactic for you. Find out all about how and where to short bitcoin!

Understanding Short Selling

Short selling is not a particularly new investment strategy. It roots back to institutional investing. Essentially, it is a trading strategy that speculates on the decline in a security’s price. Short selling is usually considered a rather advanced tactic in the institutional market. When it comes to stocks, it’s a game played by more experienced traders. 

History of Short Selling

Although shorting entered the crypto world quite recently, it’s history goes way back. According to the history books, it was invented in 1609. A Dutch businessman called Isaac Le Maire is thought to be the author of the theory. There is extensive information about very advanced contracts that were performed on the Amsterdam Stock Exchange at that era. Some of them were short sale contracts. 

However, this strategy has seen its fair share of criticism. Over the course of time, some governments have banned or restricted shorting. Critics say it is overcomplicated and complex, therefore creating unnecessary risk. But short selling we know of today has definitely seen progress when it comes to ease of use.

Why Should You Short Sell?

In the institutional market, traders use short selling as speculation. Investors or portfolio managers use it to hedge the downside risk of a long position in the same security. However, speculation always carries substantial risk. So, the gains and possible losses makes this quite an advanced trading method. 

All About Short Selling Bitcoin

Although the institutional world gives a brief overview to shorting, many aspects differ when it comes to crypto. 

Where to Short Bitcoin – the ABC

Shorting bitcoin means benefiting from the price drops of an asset. You “borrow” bitcoin to sell on the market and later “buy back” at a lower price. Traders benefit from the difference in market price. Shorting is a useful trading tactic for when you’re expecting the price of Bitcoin to decrease. You can read more about how to short bitcoin from our comprehensive guide.

However, shorting bitcoin involves lots of speculation. This means additional risks. So, make sure you are mitigating your risks. 

There are multiple options for shorting bitcoin. You can use an exchange, CFD, arbitrage or options market. As you can imagine, the most popular option is using an exchange. So, let’s focus on this and find out how to short sell bitcoin via an exchange!

Where to Short Bitcoin – Exchange

First off, not all crypto exchanges offer shorting. So, you have to do your research on which platform is your best fit. The keyword to search for is “margin trading”. It is an investment method that lets you “borrow” more funds to carry out trades and bid against price changes. In reality, the process only takes a few clicks and is automated. But you are liable for the funds you have borrowed for shorting. This is crucial to bear in mind.

This type of leverage multiplies your original funds by a defined ratio. Exchanges margin trading offers differ on a variety of factors. For instance, the maximum leverage that they offer, fees and trading terms. 

So, where to actually short bitcoin? CoinMetro offers a margin trading platform with 5x leverage. Trading indicators and other tools are integrated to the exchange. So, you can pick the indicators you wish to help you with trading

Now that you know where to short bitcoin, why not jump into practice? Head over to CoinMetro crypto exchange to start short selling crypto assets!