Complete Guide to Short Bitcoin and Other Cryptocurrencies

What Is Cryptocurrency Shorting, and How Does It Work?

Short-selling, or selling something you don't already own, is generally associated with the stock market. However, investors can also go short on Bitcoin (BTC) and other cryptocurrencies, especially given the volatile nature of most crypto assets. Volatility provides an opportunity for investors to take home huge profits by short-selling.

Basic Concepts

Shorting, or short-selling, generally refers to an investment practice that involves borrowing securities and selling them in the hope that prices will continue to fall. When someone is shorting a cryptocurrency, they anticipate a drop in value and are essentially betting that its value will continue to fall, and can be purchased at a lower price in the future. Thus, investors can make a profit from the difference between the selling price and the buying price.

Security of Shorting Cryptocurrencies

Shorting cryptocurrencies involves a high level of risk. It involves leveraged trading as well as futures and options trading, all of which are quite complicated as trading strategies. In addition, cryptocurrencies are also prone to sudden and unexpected price swings, which can lead to huge losses in a short period of time. Therefore, investors should exercise caution and understand the risks involved before shorting cryptocurrencies.

How to Short Bitcoin and Other Cryptocurrencies?

Using Futures or Options

Buying a futures or options contract allows investors to buy or sell a specific asset on a specific date, set at a specific price. Futures require an agreed transaction to occur on a set date, while options give investors the option to continue the transaction or not. By using futures or options, investors can short cryptocurrencies by setting a selling price that is lower than the current market price. If the price of the cryptocurrency falls as predicted, investors can buy back the asset at a cheaper price and pocket the profit. However, if the price of cryptocurrencies rises, investors will have to bear losses.

Using CFDs

Contratc for Difference, or CFD, is a contract that pays out the difference in value of an asset from the time the contract is opened until it closes. CFDs are often used for short-term trading and allow investors to speculate on whether an asset will rise or fall without actually owning it. Using CFDs, investors can short cryptocurrencies by opening sell positions, which means they sell assets they don't own in the hope that the price will drop. If the price of the cryptocurrency falls, investors can close their positions at a lower price and pocket the profit. However, if the price of cryptocurrencies rises, investors will have to bear losses.

Margin Trading

Another way to short crypto is through margin trading, which is often done through margin trading platforms such as brokers or crypto exchanges. Effective investors borrow money from brokers to use in making trades, thus allowing them to control larger positions. With margin trading, investors can short cryptocurrencies by selling the borrowed asset in the hope that the price will fall. If the price of the cryptocurrency falls, investors can buy back the asset at a cheaper price and return the loan to the broker, as well as pocket the profit. However, if the price of cryptocurrencies rises, investors will have to bear losses and pay interest on loans.

Prediction Markets

Prediction markets are another way to go short Bitcoin and other cryptocurrencies, and are done by placing bets on the outcome of an event. An investor can predict that Ether (ETH) will decline by a certain percentage, for example. If their prediction is correct, they will make a profit according to their bet. However, if their prediction is wrong, they will lose their bet. Prediction markets usually use specialized blockchain-based platforms, such as Augur or Gnosis.

Apa Reward dan Risiko dari Shorting Cryptocurrency?

Reward

Shorting crypto dapat membantu melindungi terhadap potensi kerugian dalam portofolio dan memberikan sedikit keseimbangan pada strategi investasi. Selain itu, shorting crypto juga dapat memberikan keuntungan yang besar jika harga cryptocurrency turun secara signifikan, seperti yang terjadi pada tahun 2018, ketika Bitcoin turun dari sekitar US$ 20.000 menjadi sekitar US$ 3.000.

Risiko

Risiko shorting crypto cukup jelas. Jika seorang investor bertaruh bahwa nilai crypto akan merosot dan justru naik, mereka bisa kehilangan segalanya. Selain itu, shorting crypto juga membutuhkan modal yang besar, karena investor harus membayar biaya pinjaman, bunga, dan komisi kepada broker atau bursa. Selain itu, shorting crypto juga membutuhkan pemantauan yang ketat, karena harga cryptocurrency dapat berubah dengan cepat dan drastis.

Kesimpulan

Shorting cryptocurrency adalah strategi perdagangan yang canggih dan berisiko tinggi. Diperlukan pemahaman mendalam tentang pasar dan risiko yang terlibat sebelum mencoba short-selling. Dengan pendekatan yang berhati-hati dan pengetahuan yang memadai, investor dapat memanfaatkan potensi keuntungan dari shorting cryptocurrency.

Cara Beli Crypto di Bittime

You can buy and sell crypto assets in an easy and secure way through Bittime. Bittime is one of the best crypto applications in Indonesia that has been officially registered by Bappebti.

To be able to buy crypto assets on Bittime, make sure you have registered and completed identity verification. In addition, also make sure that you have enough balance by depositing some funds into the wallet. For your information, the minimum asset purchase at Bittime is Rp10,000. After that, then you can make a crypto asset purchase in the application.

Monitor the price chart movements of Bitcoin (BTC), Ethereum (ETH), Solana (SOL) and other cryptos to find out today's crypto market trends in real-time on Bittime.

Also Read:

Bitcoin Analysis: The Effect of the United States Election on Bitcoin Price

What is Bitcoin Pizza and What is its History?

What Is Bitcoin and How Does It Work?

DISCLAIMER: This article is informational in nature and does not constitute an offer or solicitation to sell and buy any crypto asset. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices may change significantly from time to time and Bittime is not responsible for fluctuations in crypto asset exchange rates.