Shorting cryptocurrency is becoming more popular as Bitcoin and Ethereum continue to fall in value.
Investors are looking for methods to short crypto as the crypto crisis continues to drive down digital assets. Indeed, as Bitcoin (BTC-USD) approaches the $20,000-per-coin mark, investors are turning against the volatile currencies.
Despite the fact that some investors formerly saw cryptocurrency as a viable inflation hedge, the market has witnessed significant losses. This year, some of the most valuable cryptos by market capitalization have lost more than half of their value.
Cryptocurrency shorting is a relatively new concept. Unlike stocks, which investors can simply sell on the open market and then purchase back for a lower price if the stock’s price falls, shorting cryptocurrency is a little more complicated.
Shorting crypto is not possible directly, but there are workarounds that allow investors to profit on the market’s downturn.
5 Ways to Short Cryptocurrency
Margin trading is still the most practical technique to short Bitcoin and other cryptocurrencies. Many of the most prominent crypto exchange platforms and brokerages enable customers to borrow funds in order to create net short positions in certain cryptos. Binance and Kraken are two prominent exchanges for this type of transaction.
Shorting cryptocurrency on futures markets is another simple strategy to benefit from the crypto crisis. You can profit from Bitcoin contracts that anticipate a lower price by a specified date if they turn out to be correct. Futures contracts for a limited number of cryptos are available on the Chicago Mercantile Exchange.
Prediction markets are a straightforward method to gamble against cryptocurrency. Using crypto prediction markets such as Augur and Polymarket, investors may bet that a certain cryptocurrency will drop by a certain percentage by a certain date. You stand to earn if someone accepts your wager and you prove accurate.
Inverse exchange-traded funds are wagers on a security’s fall. However, ETFs like the BetaPro Bitcoin Inverse ETF from Canada are not available in the United States. Some investors use ETFs like the ProShares Bitcoin Strategy ETF (NYSEARCA:BITO), which provides exposure to Bitcoin futures contracts, as a workaround.
Buying short tokens is a fifth technique that investors have learnt to short digital assets. In other words, if the price of Bitcoin falls, the price of a short Bitcoin token rises. One such token is the 3X Short Bitcoin Token (BEAR-USD). Each time Bitcoin falls by 1%, the BEAR cryptocurrency should rise by 3%.