How to Short Bitcoin in 2023 6 short-selling strategies

Bollinger Bands are statistical momentum indicators that use standard deviation to determine the highs the lows BTC has been touching in a given time period. When the upper and lower Bollinger Bands squeeze, you might expect a short-term burst in price action, direction notwithstanding. Typically, taker fees are higher than maker fees as you’re removing liquidity from the market instead of providing additional tradable funds. Assume you have a $10,000 account size and leverage it 3x – you now have $30,000 to use for your trades. It can be done on any time frame from the 1-minute chart to the weekly and is suitable for a range of trading styles, including scalping and swing trading. Short selling can help you to capitalize on bearish trends, pullbacks and trade mean-reversion set-ups.

The hype will eventually die down, the uptrend will be exhausted, and a price correction will follow shortly after. If there is an expected government crackdown, use the opportunity to short Bitcoin. However, ensure that the trade you are making will not land you in trouble with regulators. The crypto market is very eventful, so keep up with what is happening within the market.

How does a short work in crypto?

If the price of bitcoin does indeed fall during that time frame, you will earn a profit. When looking for an exchange to use for margin trading, ensure it meets your demands. It offers a wide range of benefits to both new and expert traders. The benefits include high leverage, which equates to low margin requirements, making it ideal for short selling Bitcoin. When shorting bitcoin, the aim is to sell the cryptocurrency at a high price and buy it back at a lower price. Unlike most traders who like to buy low and sell high, short sellers adapt the order of this philosophy and aim to sell high and buy low.

  • For futures and options contracts, you can access the next tab labeled [Derivatives].
  • Many exchanges offer demo trading accounts to help you understand the fundamentals before trading using your capital.
  • To spot a head and shoulders pattern, you’ll look for three consecutive peaks, with the middle peak being the highest.
  • You will see the exact amount of funds that you can borrow against your collateral.
  • In the event that a major country bans or enacts some anti-Bitcoin stance, the market will adjust accordingly.
  • Any cryptocurrency that is available on a margin or futures trading platform can be shorted.

Short-selling Bitcoin can result in massive profit potential but does carry risk. In this guide, we explain what is Bitcoin shorting, how to short Bitcoin, and when to do it. If you’re thinking of shorting crypto, be aware that a short squeeze could send prices soaring and leave you with hefty losses. On the other hand, if you’re bullish on crypto, a short squeeze could provide an opportunity to make some big profits. Either way, it’s important to keep an eye on the market and be prepared for anything. In theory, a short squeeze is possible in any market, but it is particularly likely in the volatile world of crypto.

How to Short Bitcoin: A Step-by-Step Guide

It is crucial to consider external news in the political and economic sphere. News regarding government regulations usually sends the market into turmoil. Below is a chart from PrimeXBT showing various metrics such as the moving average convergence divergence (MACD). The biggest hurdle facing many US investors are the regulations put in place by the Securities and Exchange Commission. On the flip side, if you see one that predicts Bitcoin will rally, you go short. When it comes to shorting BTC, the event would directly relate to how the digital currency performs.

Future Risk Scenarios

To short a cryptocurrency on Coinbase, you will need to open a futures contract. Futures contracts are agreements to buy or sell an asset at a specified price on a specified date. In the case of shorting, you would be agreeing to sell an asset at a specified price on a specified date. In order to short Bitcoin, you need to choose a reliable cryptocurrency exchange that offers short-selling options. Then, you need to borrow a certain amount of Bitcoin from the exchange and sell the borrowed amount at the current Bitcoin market price.

Bitcoin, as an asset, is risky

If the exchange feels as if your investments are going to sour, they will close your trade early, keep your margin, and make you repay your loan. While the asset is different, shorting Bitcoin works in much the same manner. A crypto trader will borrow Bitcoin prior to a foreseen market drop. As soon as the investor receives their Bitcoin, the assets are sold.

Bitcoin CFDs

Of course, this also means that if the price of the crypto goes up, then you could lose a lot of money. Bitcoin and cryptocurrencies, in general, are usually ranked as highly-volatile assets due to unexpected price movements. Volatility affects long positions, and traders that have held Bitcoin and expect the prices to fall can use short-selling to hedge against the risk. As we will explain in later sections, there are several ways to short Bitcoin, depending on your risk profile and knowledge of the marketplace.

Short Sell – Contract for Difference (CFD)

PrimeXBT also makes for a very ideal platform for a beginner trader. A copy trading feature will allow you to copy the trading strategies used by expert traders. There are many traders to choose from and tools allowing you to filter through the trading strategies that best match your needs. Technical analysis is based on the theory that history will repeat itself in terms of prices and the market trend. This past information can then be used to make informed decisions about the future.






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