Shorting Bitcoin is borrowing the cryptocurrency, selling it, and buying it back later when prices are lower. The number of venues and ways in which you can short Bitcoin has multiplied with the cryptocurrency’s increasing spotlight in ⭕mainstream finance.

Here are some waඣys that you can go about shorting Bitcoin.

1. Margin Trading

One of the easiest ways to short Bitcoin is through a cryptocurrency 澳洲幸运5开奖号码历史查询:margin trading platform. Many exchanges and brokerages allow this type of trading, with margin trades allowing investors to “borrow” money from a broker in order to make a trade. It’s important to remember that margin involves leverage or borrowed money, which can increase profits or exacerba💃te losses.

Many Bitcoin exchanges allow margin trading at this stage. Kraken and Binance are some popular options for this strategy.

2. Futures Market

Bitcoin, like other assets, has a 澳洲幸运5开奖号码历史查询:futures market. In a futures trade, a buyer agrees to purchase𒐪 a security with a contract, which specifies when and at what price the security will be sold.

If you buy a futures contract, you are betting that the price of the security will rise; this ensures that you can get a good deal on it later. If you sell a futures contract, it suggests a bearish mindset and a prediction that Bitcoin will decline in price. In this context, you can short Bitcoin by purchasing contractꦚs that bet on a lower price.

Bitcoin futures trading took off around the run-up in cryptocurrency prices at the end of 2017. It is available on a wide variety of platforms now. You can short Bitcoin futures at the 澳洲幸运5开奖号码历史查询:Chicago Mercantile Exchange (CME), the world’s biggest derivatives trading platform, and on some cryptocurrency exchanges. Bitcoin futures can be purchased or traded on popular exchanges like Kraken or BitMEX and can also be found at 澳洲幸运5开奖号码历史查询:popular brokerages such as eToro.

You can also trade perpetual Bitcoin futures on platforms like BitMEX if you h♔ave access to them. Perpetual futures do not have closing dates, allowing traders to set and forget positions or not have to worry about rolling them.

3. Binary Options Trading

Call and put options also enable traders to short Bitcoin. Iꩲf you wish to short the currency, you could🦩:

• Buy a put option: Buying a put option gives you the right, but not the obligation, to sell the bitcoin at a specified price (the 澳洲幸运5开奖号码历史查询:strike price).
• Sell a call option: Selling a call option gives you the obligation to sell the bitcoin at the strike price if the buyer chooses to exercise it.

In both cases, you profit when Bitไcoin’s price falls below the s😼trike price before the option expires.

You can also profit from buying a call option (which gives you the right, but not the obligation, to buy the bitcoin at the strike price) or selling a put option (which gives the buyer the right, but not the obligation, to make you buy the bitcoin at the strike price), but these are considered 澳洲幸运5开奖号码历史查询:long positions because you profit when Bitcoin’s price rises ab🥂ove the strike price before the option expires.🐻

Binary options are avai🔴lable through several offshore exchanges, but the costs (and risks) are high. One of the advantages of using binary options trading over futures is that you can limit your losses by choosing not to execute your options. Thus, your losses are limited to the price you paid for the put options.

Popular venues for trading options are Deribit and OKX.

4. Prediction Markets

澳洲幸运5开奖号码历史查询:Prediction markets—while not necessarily shorting—are where you place bets on the outcome of events. Prediction market🧸s in crypto are similar to those in mainstream markets. Parties can create an event to make a wager based🃏 on the outcome.

You could, therefore, predict that Bitcoin will decline by a certain margin or percentage, a🍬nd if anyone takes you up on the bet, you’d stand to profit if it comes to pass.

Popular crypto prediction markets are GnosisDAO and 澳洲幸运5开奖号码历史查询:Polymarket.

5. Short-Sell Bitcoin

Though this strategy might not appeal to all investors, those with the stomach can reap gains if their bet against Bitcoin pricing succeeds. If your brokerage or exchange allows it, you could borrow some Bitcoin and sell them at a price you are comforta꧟ble with. When the price drops, repurchase some and pay back the exchange. Of course, if the price does not adjus🔯t as you expect, you could lose money in the process.

If the price goes up (instead of down, as you had hoped), you꧑ could end up with significant losses.

6. Using Bitcoin CFDs

A contract for difference (CFD) is a financial strategy that pays out money based on the price differꦗences between the open and closing prices for settlement. Bitcoin CFDs are similar to Bitcoin futures in that they are essentially bets on the cryptocurrency’s price.

When you purchase a CFD predicting that prices will decline, you are betting against Bitcoin. This is not sh😼orting Bitcoin, but it is similar in that you’re acting on a belief that prices will drop.

CFDs have a more flexible settlement tenure than Bitcoin futures, which have predetermined settlement d꧃ates. Additionally, in certain Bitcoin CFD markets, traders can enter into a contract based on Bitcoin’s perfo꧙rmance or its performance relative to fiat currency or another crypto.

7. Using Inverse Exchange-Traded Products

Inverse exchange-traded products (ETPs) are instruments that use leverage and other techniques to flip the returns an underlying asset generates. They are similar to futures contracts and are used in conjunction with oth♉er derivatives to produce returns.

Until January 2024, the only exchange-traded product available to U.S. residents was ProShares’ Short Bitcoin Strategy ETF (BITI). That month, the SEC approved 11 spot Bitcoin ETPs that can be used for shorting Bitcoin.

Factors to Consider While Shorting Bitcoin

As with any strategy related to cryptocurrencies, shorting Bitcoin involves enormous risk. There are several aspects you should consider while shorting Bit🎃coin.

Bitcoin Price Is Volatile

Most avenues to short Bitcoin depend on 澳洲幸运5开奖号码历史查询:derivatives. These derivatives are based on pricing; 澳洲幸运5开奖号码历史查询:fluctuations in the cryptocurr෴ency’s price have a do🐲mino effect on investor gains and losses.

For example, Bitcoin futures mimic spot price changes, meaning they cannot be used as an effective hedge against an investment in actual Bitcoin. Similarly, options trading in Bitcoin can multiply losses due to the underlying cryptocurrency’s price 澳洲幸运5开奖号码历史查询:volatility.

Bitcoin, as an Asset, Is Risky

Price is just one of several risks you꧒ will have to evaluate while shorting the cryptocurrency. Compared to other, more established assets, Bitcoin is new. It has been around only since 2009. Therefore, there isn’t sufficient data or information for investors to make an educated decision abou🥂t its workings or feasibility as an asset.

While established platforms like CME are saf🧔er and guarantee execution for Bitcoin derivatives, new platforms might start off “clunky” and be more susceptible t𒊎o hacks.

The Regulatory Status for B⛎itcoin Is 🃏Still Developing

Regulations across geographies are still being developed and implemented. The United States has made str💦ides, as several key court cases have concluded and several Bitcoin investment instruments have been approved. The European Union (EU) published its Markets in Crypto-Assets legislation, which guides the bloc’s members in their cryptocurrency dealings.

There are several leading Bitcoin trading platforms, such as Deribit, tha🌼t are not available to American investors due to reꦇgulatory compliance issues. This poses issues for those in the U.S. who wish to trade certain instruments or derivatives offered on exchanges that are not regulated by U.S. authorities because if they trade on them, they are not protected.

Knowledge of Order Types Is a Must

Before undertaking a short position in Bitcoin, you should brush up on your knowledge of different order types. They can help limit losses if the price trajectory does not go in the direction that you initially bet—for example, using 澳洲幸运5开奖号码历史查询:stop-limit orders while trading 𝓀derivatiಞves can curtail your losses.

The Bottom Line

Shorting Bitcoin is a viable option for traders comfortable with the risks. Several exchange-traded products and strategies are available for shorting Bitcoin. Before yo🧔u begin, it helps to learn about order types and to practice your strategies.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our 澳洲幸运5开奖号码历史查询:warranty and liability disclaimer for more info. As of the date this article was written, the author owns BTC and XRP.