How To Short Bitcoin: 5 Ways To Profit From a Falling BTC Price
Latest posts by Dean (see all)
- Why Blockchain and Remanufacturing Are a Perfect Match - May 8, 2019
- MinedBlock ‘Mining as a Service’ vs Cloud Mining - May 4, 2019
- How Blockchain Technology is Changing the Face of Online Gambling - May 2, 2019
The price of any currency or asset goes both up and down over time – and Bitcoin is no different. If you have developed an interest in Bitcoin as an investment, rather than just a way to make payments and avoid feeding the sins of the banking industry, you should therefore consider looking at ways to make a prifit from a falling bitcoin price as well as increases in value. Buy and hold (or hodl as many bitcoiners say) can be good sometimes, but it can’t be the best option 100% of the time – sometimes you will need to ‘go short’ – effectively betting on the price going down.
See Also: How To Make a Profit Trading Bitcoin
There are various different ways that you can ‘go short’. Of course if you own a large stash of BTC then you can just sell a few in the hope of buying them back later at a cheaper price. This is the easiest way, but there are other methods that can potentially give you a larger profit – although be warned that this usually means they will also give you a bigger loss if you are wrong and the price goes up.
Here are three of the most popular answers to the question – how to short bitcoin?
1. Margin Trading at Bitfinex
Margin trading means that you borrow money in order to make a trade. For example, if you have 1 bitcoin you would like to use to bet on the price going down, you may be able to use that 1 BTC to borrow 10 btc at 1:10 leverage. This means you will either make 10 times the profit or 10 times the loss.
Check out the video below for a super simply guide to shorting btc using Bitfinex
2. Sell Bitcoin Futures
A futures contract gives its buyer the right to purchase a currency or commodity at a fixed price at some specified date in the future. A person buying this contract is therefore betting that the price will go up, meaning that when their contract expires they can buy at below market price and sell immediately for a profit. The person selling the contract profits if the price goes down, because when the contract expires the other party will have to buy their coins from them at above market price. If you already own Bitcoin this can be a good alternative to ‘hedge your bets’ and profit from a downturn in price, without having to actually sell your coins – because if your coins are bought from you at above market price you can just buy them back on the open market and take the difference as your profit.
You can sell futures contracts at OrderBook.net
3. Bitcoin Options Contracts
Options are another financial derivative which can be used to profit on both rises and falls in price. You can use options to place a bet that the value of Bitcoin will be higher or lower than a particular value at a certain point in the future (say after 1 day, or 1 week), or that the value will or won’t hit a certain level above or below its current price within a particular time period.
You can purchase options contracts or create your own and pay with BTC through services such as BTC Oracle
Another options service with 5 different order types and a kind of practice account set-up for learning how to use them is Gryfx
4. Binary Options
Binary options are a simplified type of options contract, usually aimed at day traders. You simply bet that the price will be higher (in which case you are buying a ‘call’ option) or lower (a ‘put’ option) than its current value at a specified point in the future – usually measured in hours with the end of that day as the limit. This fill give you a fixed profit, usually around 40-80%, if you are correct, but you will lose everything if you are incorrect. This is a ery high risk high return method which often appeals to gamblers.
5. Electronically Traded Funds (ETFs)
ETFs are funds that track the price of a currency, commodity or asset without actually owning any of it. You can use an ETF to go ‘long’ or ‘short’ – depending on whether you think the price will go up or down. ETFs often come with reliable high level leverage (1:10 or even 1:20).
A popular international ETF fund can be traded through Pluss500