The Best Ways to Short Bitcoin and Other Cryptocurrencies

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Shorting Bitcoin might be a good idea for investors who truly believe that the cryptocurrency might crash somewhere down the line. It’s also a great idea for Bitcoin maximalists, who believe in the mother of cryptocurrencies in the long run, to hedge their long positions in the shorter term. With this in mind, here are the top 5 ways in which you can short Bitcoin.

CFD Margin Trading

Trading on a margin trading platform is one of the most straightforward ways of shorting Bitcoin. There are lots of exchanges that will allow margin trading. This type of trading will enable investors to "borrow" money from a broker for trading. We need to remember that a leverage factor may exist, which could impact on profits or losses. Lots of Bitcoin exchanges do allow margin trading.

SELL Bitcoin        BUY Bitcoin

 The most popular way of margin trading is CFD trading. SimpleFX is one of the best and fastest-growing brokers, offering the best, award-winning trading app SimpleFX WebTrader. More importantly, unlike the major competition, SimpleFX derives from the cryptocurrency community and offers several accounts in crypto, as well as direct crypto payments.

Futures Market

Just like other assets, Bitcoin has a futures market. When you trade on the futures market, the buyer will agree to buy a security with a contract that specifies the price the security will sell for and when it will sell. People who buy futures contracts will be feeling confident that the security's price will rise – they need it to get a good deal. Those who sell futures contracts, however, are often on a bearish mindset, predicting that the security will decline in value. The Merkle says, "selling futures contracts is an excellent way to short bitcoin." 

Until recently it was quite difficult to find a trustworthy and user-friendly cryptocurrency futures market. However recently P2P cryptocurrency contract exchanges appeared. The most prominent are:

BitMEX.com

PrimeBit.com

Kraken Futures

Prediction Markets

Now let's take a look at another way in which you could short Bitcoin. Prediction markets haven’t been around for long as far as cryptocurrencies go, but they are still a great way to short currencies such as Bitcoin. Prediction markets allow investors to create events and make wagers based on their outcome. Therefore, you could predict a decline in price by a certain percentage or margin and offer a bet. You will profit it someone takes you up on the chance if it comes to pass. One example of a Bitcoin prediction market is Predictious.

Trading Binary Options

Another way of shorting Bitcoin is to call and put options. If you want to short Bitcoin, you will execute a put order. Usually, you'd do this with an escrow service. You would, therefore, be aiming to sell the currency at the price it is today even if the price then drops. Several offshore exchanges offer binary options, but both the risks and the costs are high. 

Bitcoin Assets Short Selling

This activity might not appeal to all investors, and if you are interested in buying and selling real Bitcoin, you could directly short-sell the cryptocurrency. For instance, you sell off the tokens at a comfortable price and then wait until their price drops before repurchasing them. This, of course, has a risk involved in that you could lose Bitcoin assets or lose money when you’re doing this.

SELL Bitcoin        BUY Bitcoin

In Summary

If you’re looking to short sell Bitcoin to earn a profit when the price falls, there are many things you could do. Short exposure is available through futures or options. You could also try margin facilities too. As you know, Bitcoin’s price can be volatile, and it can rise (or descend) very suddenly. Selling short is a good way for both traders:

  • think Bitcoin is a bubble and has no intrinsic value
  • believe in Bitcoin in the long term, hold the crypto, and want to hedge against the local downturns.

Futures Market and CFD margin trading are the best ways of shorting Bitcoin, and you can do it with leverage. Your downturn is limited by the account’s deposit, and the upside is sky-high (but not unlimited, since in theory Bitcoin could go to $0, but who would bet on it?). 

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