What is and how to short bitcoin?

More and more crypto traders are aware that in addition to the usual crypto trading and trading, there are several other ways to make money on them. One of them is Bitcoin’s less known but equally effective shorting BTC. Curious what that is? Read our article, from which you will learn the most important information about this method.

What is Short BTC?

Shorting Bitcoin is a crypto selling process in the hope that its value will drop and you can buy it again at a lower price. In this way, investors earn on the difference in market price. Briefly describing – it is an investment method in which the profit is achieved by decreasing the price of the digital currency. It can be said that the motto of this form of earning is: “buy cheaper and sell expensive”. Basically you borrow coins, committing you to return them over time. Then you sell coins at the current market price, knowing that the price will fall in the near future. And when the value goes down, you buy the coins back and give them back to the creditor. Earnings are based on the difference between the sale price and the price at which you bought the crypto.

Source: medium.com 

Thanks to this difference in value you can gain but also lose. Therefore, this selling method should be implemented only when the decrease in the price of crypto value is certain. However, there is a good chance to achieve huge profits, especially on the cryptocurrency market.

How to short Bitcoin?

If you want to short Bitcoin, you must use the crypto trading platform, where you can make an offer for such a sale. Then the platform sells BTC from its own resources on your behalf, and then you have to pay them back with the same number of coins. If your offer includes 12 BTC coins, you will have to return the same amount of crypto, regardless of its current price.

When the price of digital assets drops, it will be easier to give away 12 coins, but if the price increases, it will be much harder. Therefore, read the rules, regulations and guidelines of the company you borrow BTC coins from.

Margin Trading

This is one of the easiest ways to short BTC. Many crypto exchanges allow the process of trading with margin. For this type of transaction, investors borrow money from the broker to make payments. This also includes borrowing a certain number of BTCs from creditors and selling assets at market price. When the price drops, the borrower can buy back BTC and return the borrowed amount. This will keep the profit between the sale price and the purchase price.

Futures market

Shorting BTC can be done by using the futures market. In short, when the buyer agrees to buy crypto with a given contract, which determines at what price the digital currency will be sold at a later date.

If you decide on this type of contract, you assume that the price of BTC will increase in the near future. So if the value really increases, you can buy Bitcoin at a predetermined price. This price will be lower than the current market price. This ensures that you will earn in the future on these digital assets.

Source: blokt.com 

Binary options trading

This option allows you to choose between buying and selling options. This form of contract allows investors to buy or sell Bitcoin coins at a certain price and exact date in the future.

In short – traders realize a put option agreement, probably with a deposit account. This means that they will sell BTC at the current price, even if the price falls later.

Predictive markets

Predictive markets can also be considered for BTC shorting. They allow investors to predict the market and bet what can happen. Thanks to the analyzes, the investor can predict situations that will be taking place in the market and state that the BTC rate will drop by a certain percentage. Then, if someone accepts the prediction data on the bet and the rate actually drops, then the first investor will make a profit.

Short sale of Bitcoin assets

This is definitely one of the easiest ways to make a profit by selling BTC coins on the open digital asset market. Investors interested in buying and selling Bitcoins can directly sell coins. Crypto owners simply sell coins at a price that is best for them. Then they wait for the price of the assets to fall, and when this happens, buy them again. If the value does not change as expected, they may lose money or Bitcoins. However, there is a good chance of making a profit from the difference between the selling price and the buying price.

Are you ready for BTC shorting? We hope that this article will allow you to start the adventure with Bitcoin shorting. Still, it’s a risky investment method. You must perfectly predict how the market behaves to get the best results out of this method.

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