how to short crypto

How to Short Crypto in Different Ways

Aggrey A. Avatar
May 6, 2022
6 min reading time

The crypto market is similar to the stock market in many ways, and if you know about the stock market, you will have an idea about the crypto market. The investors in the stock market are known for the quality that they don’t sit back and lose hope when the market goes down; instead, they take it to their advantage by going to short crypto.

Shorting or short selling is a strategy where you buy higher and then wait for prices to go low so you can buy again. So for such investors, it doesn’t mean anything if the market goes bearish, which it is currently. Instead, they can adapt to any change and make it work.

Today’s article will talk about what shorting is, how to short crypto, and everything else that surrounds shorting. But before that, please do your research before doing it because it is a risky business and invest only what you can afford to lose.

What Does ‘Short Crypto’ Mean

Crypto shorting means that you borrowed the coin and traded it with the market price. After that, you will wait for the prices to go down so that you can buy again at a low price and pay the money you borrowed and your profit, which will be the difference between buying and selling price, so this is quite simple.

Many cryptographic platforms like Bitfinex & Kraken give the services of margin trading, where you borrow your desired crypto at high rates of interest, which ultimately increase their leverage. This makes the whole process of lending cryptocurrency for shorting automated by default.

Since nothing is consistent in the crypto market and anything can happen at any time, shorting is also an unpredictable business. You can get gains, but there’s a huge probability of losing as well. On the other hand, when you keep a cryptocurrency of your choosing, you lose nothing if you do not earn any money, and the odds of it dropping to zero are pretty slim.

But in short, there is a high chance that the prices will go up, so you lose big time. To avoid this situation, you must do your research beforehand about that coin, and only then should you short if you are particular about the fall in prices.

How to Short Crypto on Coinbase

We have discussed how to short crypto from the start. Now we will talk about how to short crypto on Coinbase.

Coinbase is one of the biggest and most used cryptocurrency exchanges globally, and it is working in 103 different countries in different capacities. You can use future contracts on Coinbase, but margin trading isn’t available anymore. So let’s take a look at those steps that will help us know how to short crypto on Coinbase:

Step 1: Downloading the Coinbase wallet is the first step.

Step 2: Select a Coinbase Wallet username for yourself.

Step 3: Safely store your recovery phrase.

Step 4: Understand and budget for Ethereum network fees.

Step 5: Buy ETH and transfer to Coinbase wallet.

Step 6: Use your ETH to buy 1x short bitcoin tokens in the Trade tab.

How to Short Crypto on Binance

Short selling is a strategy for selling cryptocurrency while you do not own it, which allows you to profit even during a decline. Today we will discuss the process of how to short crypto on Binance. Please note that short selling and margin trading is hazardous, and you shouldn’t do it without sufficient knowledge.

Step 1:

  • Open the margin account;
  • Go to your Binance account;
  • From the top menu, go to trade, then the margin.

Step 2: Choose an account; choose the account you want to use for short selling, either “cross” or “isolated”;

Step 3: You need to provide collateral for whichever account you choose;

Step 4: Next step is to borrow so that you can start with the next step, which is to borrow;

Step 5: Now, it is time to trade. As we had explained earlier, you need to buy high and sell low;

Step 6: Time to repay. Now at this time, the prices must have dropped so you can repay and take the profit.

What Else You Should Know about Shorting Crypto

With all these good things shorting Crypto brings your way, we should also know about the risks that come with it. It feels exciting to make some extra cash but not without considering its chances.

The first thing to understand here is that you don’t have the ownership of this coin, you have only borrowed it from someone else, and for whatever time you hold it, you will pay the interest. So if things don’t go well, you might have to keep this coin for a bit longer which will only increase the interest that will, later on, get deducted from your profit, so that’s not good news.

The second thing to consider here is your loss which is a lot in shorting if it rises more than what you initially invested. So if it grows, you will buy it at a high price to lower the average cost if you do not want the loss.

Another thing to check is the rules and regulations of your country so that you don’t challenge anything legal in the process. I am listing down different steps on how to short crypto.

1. Margin trading;

2. Futures;

3. Binary Options;

4. CFD;

5. Prediction Market;

6. Direct short selling.

Related articles: Gyen Price Prediction | ACH Price Prediction | Solana Price Prediction

How to Short Crypto – Conclusion

Short selling can be done with the help of various methods, but before you do this, you need to study the trend and directions it can take since the crypto market can go in any order anytime, and so many factors affect it, like notable people talking about it, politics, etc. you have to be one step ahead to get your results.

To conclude, shorting is an excellent technique to earn even when everybody around you is losing but do not do this without first getting proper research on it, and if possible, trade with small amounts so that you do not lose any significant amount it is good if you are a beginner.

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* The information in this article and the links provided are for general information purposes only and should not constitute any financial or investment advice. We advise you to do your own research or consult a professional before making financial decisions. Please acknowledge that we are not responsible for any loss caused by any information present on this website.
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