Leveraged tokens represent a basket of perpetual contracts and move based on futures price fluctuations. If you sell 1 BTC for $30,000 and the price decreases to $27,000, you stand to make about $3,000 profit, as opposed to $1,000 if you had not leveraged your account. This guide is only simplistic in outlining the concept of shorting Bitcoin. The entire process is more complex than this, hence, we highly advise you to watch an explanatory video below as well.

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. In this tutorial, we will use the isolated margin wallet, so scroll down to the trading panel, which is located below the charting window. As the name suggests, inverse Bitcoin ETPs are specialized instruments that track the price of BTC with a twist. As the value of the underlying asset rises or falls, that of the inverse ETP will move in the opposite direction.

How to Short Sell Bitcoin and Other Cryptocurrencies

Finally, select the “Close” button on the right of the open position. You can also choose to close all your positions at the current market price by selecting the green “MKT Close All” button. Clever use of a short-selling strategy allows a trader to make money when the price of BTC is falling. The most obvious time this would be useful is during a Bitcoin bear market, like that of 2022, when BTC plunged 65%.

Related guides

You can leverage your Bitcoin short (up to 5x on some exchanges) if you’re feeling particularly confident or risky. Crypto is risky, “shorting” assets is risky, and the two combined are nuclear-level risks. As with any strategy related to cryptocurrencies, shorting Bitcoin involves enormous risk.

Later, in this guide, we will highlight some of the various ways in which a trader can participate in shorting Bitcoin, but let’s start from the beginning. Brokerages and exchanges are not permitted to offer CFDs to U.S. residents because they are traded over the counter and are not regulated by the Securities and Exchange Commission. You can learn passive and active investing strategies through a crypto trading course. Prediction markets—while not necessarily shorting—are where you place bets on the outcome of events.

1. When you enter a Bitcoin short position, you first borrow BTC from your exchange and immediately sell it at the current market price.
2. Although liquidation is not a concern, if the market moves against you, you may be forced to purchase BTC at a higher price than you sold it for.
3. You may obtain access to such products and services on the Crypto.com App.
4. Reversely, this digital asset can shed thousands of dollars in market value in minutes.
5. As soon as the investor receives these stocks, they sell them at the current market value.

CFDs are traded through traditional financial brokers rather than double entry accounting accountingtools on centralized or decentralized cryptocurrency exchanges. They are considered high-risk investment vehicles and should only be used by experienced traders. Getting started with spot margin trading is simple and can be used to amplify your profits using leverage. Keep in mind that this works both ways, and losses will depend on how you manage your risk and stop loss. Perpetual futures contracts, or “perps” are the most popular way to short Bitcoin, with billions of dollars’ worth of futures contracts bought and sold daily. Perps are traded the same way as regular futures, with the main difference being that the contracts do not have an expiration date and can be held indefinitely.

This sudden drive to repurchase Bitcoin drives the market value up sharply. When this scenario plays out, it’s what is known as a short squeeze. To avoid this scenario, you must be vigilant in your market assessments. Short selling BTC and other cryptocurrencies can be a good way to make a profit, but it comes with some caveats. Learn more about futures and options in Introduction to Crypto Derivatives, Options, and Futures.

Step 4: enter your trade details

For example, if you had $1,000 and wanted to open a long position with 10x leverage, your margin would be $9,000, making a total position of $10,000. For example, sensing the market is overheated, you enter a short position with 1 BTC when the price is exactly $35,000. Over the next week or two, the price falls to $30,000 and you decide to close your position.

CFDs are a relatively new way to short Bitcoin, and they can be a more affordable and accessible way to do so than other methods. However, it is important to remember that CFDs are leveraged products, which means that you could lose more money than you invest. A CFD (Contract for Difference) is a contract between two parties that speculates on the price of an underlying asset – in this case, Bitcoin.

One of the most popular ways to short Bitcoin is through the use of CFDs. CFDs allow you to short Bitcoin without purchasing any coins directly. Instead, you sign a CFD and agree to just pay the difference between the price of the asset at the time of your loan and your contract rate. CFDs are popular because they are more convenient and cost-efficient because there is no need to make additional purchases. Importantly, you will need to pay back any loan you take, plus fees. If you borrow ten Bitcoin, you’ll need to have those coins back when it’s time to repay your loan.

It is not intended to offer access to any of such products and services. You may obtain access to such products and services on the Crypto.com App. UpDown Options are subject to jurisdictional limits and only available to US users of the Crypto.com App. Before accessing the Crypto.com Exchange, please refer to the following links and ensure that you are not in any geo-restricted jurisdictions for Spot Trading and Margin Trading.

Advanced Trading Strategies

When you visit the margin trading page, the BTC/USDT (Bitcoin / USD Tether) trading pair will be selected by default. However, if this is not the case, use the selection panel to search for the right BTC pair. On the flip side, the trader could also opt to take the buyer role in the contract if they believe the price of BTC will rise above the settlement price. If that’s the case, they will be obligated to buy the asset at a discount, but if they are wrong, they will do the same at a premium. You can find more but less common strategies to short crypto with a little bit of research. Let’s delve a little deeper into these four to understand what each method entails.

It is also used as a strategy by some traders for hedging risks in unpredictable and volatile markets. For those wanting to short Bitcoin, it is important to conduct thorough research, analyse market trends, adopt risk management strategies, and closely monitor positions. Shorting crypto can be a potentially profitable strategy, allowing traders to benefit from market downturns. However, it’s important to note that shorting involves significant risks due to the unpredictable nature of cryptocurrency markets.