Yes, it is. Shorting is when you sell your bitcoin, hoping or expecting its value to drop. The aim is later to purchase it at a lower price. This allows you to earn a profit by buying low and selling high. The price difference can also mean a loss if you predicted wrong, and instead of the price falling, it climbs to a higher rate.
You then need to buy at a loss by paying the higher rate or wait for the price to drop. There’s an element of risk in every strategy.
Remember that the value of any cryptocurrency can be volatile. The stakes are higher in short trading, especially in unregulated cryptocurrency markets.
Where to short bitcoin?
Many bitcoin trading platforms and exchanges offer options for short trading with bitcoin. Below we’ll highlight a few of them.
Kraken is among the earliest and most popular cryptocurrency exchanges accessible in the U.S. It’s available to citizens of the United States, Japan, Canada and other European countries. Its user-friendly trading platform has a high liquidity level. This allows you to fund your account quickly and trade at high volumes.
PrimeXBT is a bitcoin-based exchange. It’s famous for its short trading possibilities and high leverages. PrimeXBT offers a modern trading platform. It processes a daily average of $500 million in trading volume.
Bitfinex is well known in the crypto industry and caters more for intermediate to advanced traders. It provides up to 100x leverage. Bitfinex also caters for institutions that wish to trade.
How does short trading work?
Short trading or short selling bitcoin can only be done through a cryptocurrency trading platform or exchange. You’ll need to set up each short trade individually. These are the recommended ways of short trading through exchanges if you don’t want to manage your short trade directly, as explained above.
Your chosen platform can use bitcoin from its supply and sell it for you. You’ll need to repay the exact amount loaned regardless of market fluctuations in bitcoin’s value. This method of trading holds higher risks as far as debt is concerned. It’s also one of the easier ways to short trade and leverage can be included in the trade setup.
Bitcoin is the only crypto asset that has future markets. In future trades, you agree to buy bitcoin through a contract. The contract specifies the price that it’ll be sold for and when it’s sold. You do this when you think the bitcoin price will rise and sell the coins once the price has risen for a profit.
In binary trading, call and put options can be set up. Put orders allow you to sell your bitcoin at the current value, even if it drops later. This method involves higher costs and risks as your profits may be limited.
Prediction markets haven’t been available options in cryptocurrency trading for long, but can be viable for shorting bitcoin. This market allows traders to create events to make wagers based on predicted outcomes. You could expect bitcoin to decline within a certain percentage or margin. If you’re taken up on your bet, you can profit from correct predictions.