Can Crypto Be Shorted? How to short cryptocurrency and what to know before you do
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What is shorting crypto?
Shorting crypto is a way to make money if the price of a cryptocurrency goes down. To short a cryptocurrency, you borrow it from somebody else, sell it, and then buy it back at a lower price so you can give it back to the person you borrowed it from. If the price goes down like you expect, then you’ve made money. If the price goes up, then you’ve lost money.
How to short crypto
Past performance is not an indicator of future results.
Cryptocurrencies can fall in value as well as rise, and you could lose money by investing.
CFD, spread betting and trading crypto assets is complex and comes with a high risk of losing money rapidly due to leverage.
75% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets or CFDs work and whether you can afford to take the high risk of losing your money.
Cryptocurrencies are a highly volatile investment product. Your capital is at risk.
Why people short crypto
There are a few reasons why people might want to short crypto. For one, they may believe that the market is due for a correction and that prices will soon go down. Or, they may simply want to hedge their bets by taking a position in both crypto and traditional markets.
Whatever the reason, if you’re thinking of shorting crypto, there are a few things you should know. First, it’s important to understand how shorting works. When you short an asset, you’re essentially betting that its price will fall in the future. If it does, you make money. If it doesn’t, you lose money.
So how do you actually short crypto? There are a few different ways, but the most common is through a platform like BitMEX or Deribit. These platforms allow you to trade cryptocurrency derivatives, which are financial contracts that derive their value from an underlying asset (in this case, cryptocurrency).
The most popular type of derivative is a futures contract. With a futures contract, you agree to buy or sell an asset at a set price at some point in the future. For example, let’s say you wanted to short Bitcoin at $10,000 per coin. You could do this by buying a Bitcoin futures contract that expires in one month and is priced at $10,000 per coin today.
If the price of Bitcoin falls below $10,000 when the contract expires, you would make money. If it doesn’t, you would lose money.
Of course, there’s always risk involved when Shorting any asset Whether it’s traditional or crypto assets So before Shorting Anything do your own research
Risks of shorting crypto
Shorting crypto can be a risky proposition, as the market is highly volatile and prices can swing wildly in either direction. Furthermore, due to the lack of regulation in the space, it can be difficult to find reliable brokers to work with.
Still, some investors see shorting as a way to make money in a bear market, or simply as a way to hedge their portfolios against downward price movements. If you do choose to short crypto, make sure you understand the risks involved and always use stop-loss orders to limit your downside.