How to Short Crypto on Coinbase

If you’re looking to short crypto on Coinbase, you’ll need to follow these simple steps. With Coinbase, you can short Bitcoin, Ethereum, and other major cryptocurrencies.

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What is shorting?

Shorting is a way to profit from the falling price of an asset. To short an asset, you borrow it from somebody else, sell it, and hope to buy it back at a lower price so you can return it to the person you borrowed it from and keep the difference.

What is a short squeeze?

A short squeeze is a situation in which a heavily shorted stock or other asset jumps in price, forcing short sellers to buy it back at a higher price to prevent further losses. This buying activity drives the price up even further, squeezing out the remaining shorts. A short squeeze can quickly turn into a “short squeeze rally” as more and more shorts are forced to buy.

How to short crypto on Coinbase

If you’re looking to short crypto on Coinbase, there are a few things you need to know. In this guide, we’ll show you how to short crypto on Coinbase, as well as explain the risks and rewards associated with this strategy.

Sign up for a Coinbase account

If you don’t already have a Coinbase account, you’ll need to sign up for one. This process is pretty simple and only requires your name, email address, and password.

Once you’ve entered this information, click the “Create Account” button and you’ll be taken to the next page.

On this page, you’ll need to enter your phone number so that Coinbase can send you a verification code. Once you’ve entered your phone number, click the “Send SMS Verification” button.

You should now see a 6-digit verification code appear on your screen. Enter this code into the “Verification Code” field and then click the “Verify Phone Number” button.

Enable margin trading

In order to short crypto on Coinbase, you will first need to enable margin trading. To do this, go to the “Settings” page and scroll down to the “Margin Trading” section. You will need to confirm your phone number and email address before you can enable margin trading.

Once margin trading is enabled, you can go to the “Trade” page and select the “Short” option from the drop-down menu. Here, you will need to enter the amount of crypto you want to short, as well as the leverage you want to use.

Leverage allows you to trade with more money than you have in your account. For example, if you have $100 in your account and you enter a trade with leverage of 2:1, you are effectively trading with $200. This can allow you to make bigger profits (or losses) than if you were only trading with your own money.

However, it is important to remember that leverage also amplifies your losses. So, if the price of crypto goes against you, you could end up owing money to Coinbase.

Place a short order

To short a digital currency on Coinbase, you will first need to set up a margin account. This can be done by going to the “Accounts” page and selecting “Add Margin Account”.

Once you have done this, you will be able to see your margin account on the “Balances” page. To short a digital currency, you will need to place a “sell” order for more than you currently have in your account. For example, if you wanted to short 1 BTC, you would need to place a sell order for 1.1 BTC.

You can do this by going to the “orders” page and selecting “sell”. From here, you will need to enter the amount of digital currency that you want to sell, as well as the price at which you want to sell it. Once you have done this, your order will be placed and will remain open until it is filled by another user.

What are the risks of shorting crypto?

When you short crypto on Coinbase, you are essentially betting that the price of the crypto will go down. This can be a risky proposition, as the price of crypto is highly volatile and can go up or down quickly. If the price of the crypto goes up, you will lose money.

Liquidation risk

If the price of the cryptocurrency you are shorting falls below a certain price (known as the liquidation price), your position will be automatically closed by Coinbase Pro and you will incur a loss. The size of your loss will depend on the size of your position and the difference between the liquidation price and the actual price of the cryptocurrency at the time your position is closed.

Counterparty risk

The first and most obvious risk of shorting crypto is what’s called “counterparty risk.” This is the risk that the person or entity you’re borrowing the crypto from will not be able to repay you when you demand it back. For example, if you shorted BTC on Coinbase and the price of BTC went down, then you would be able to profit from that move. However, if Coinbase were to go bankrupt before you were able to close out your position, then you would be at risk of losing your entire investment.