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How to Short Bitcoin

short bitcoin

How to Short Bitcoin

Bitcoin has recently risen to historic levels at an unprecedented rate leaving many people worried about how long this growth can last. Whether you’re a Bitcoin skeptic or want to take advantage of the seemingly imminent correction, you’re probably wondering, “Can I short Bitcoin?”

Bitcoin one year chart

Can you short Bitcoin?

Yes. Although not as prevalent as buying, there are a few different ways you can short Bitcoin:

  • Shorting Bitcoin on an exchange
  • Shorting Bitcoin CFDs
  • Bitcoin futures market

Shorting Bitcoin on an exchange

If you already have experience trading cryptocurrency, the most natural way for you to short Bitcoin is on a cryptocurrency exchange. Many of the major exchange such as GDAX and Kraken give you the option to short the coins on their platform.

Bitfinex and some other exchanges also have leverage trading. You can leverage your Bitcoin short (up to 5x on some exchanges) if you’re feeling particularly confident or risky.

Shorting Bitcoin CFDs

A CFD (Contract for Difference) is a contract between two parties that speculates on the price of an underlying asset – in this case, Bitcoin. These investment derivatives allow you to “bet” on the price of Bitcoin without having to actually purchase it.

Not all CFD platforms have Bitcoin shorting options. If this method seems well suited for you, you may want to check out AvaTrade, one of the most popular Bitcoin CFD websites.

Bitcoin futures market

Similar to a Bitcoin CFD, you can also short Bitcoin through a futures trade. To short Bitcoin with this method you need to sell a future contract for Bitcoin at a price that’s lower than it is currently.

Until recently, there weren’t many reputable trading platforms you could do this through. However, the Chicago Mercantile Exchange (CME), Nasdaq, and most recently CBOE all announced that they’re opening up Bitcoin futures trading early this December.

Is shorting Bitcoin risky?

Yes. When you buy “long” on an asset, the maximum amount that you can lose is what you’ve invested because an asset can’t be worth less than $0.

When you short an asset, you can lose all your money if the asset continues to rise.

With Bitcoin sometimes doubling in price before any significant pullback, shorting it could be a risky endeavor. That being said, there’s plenty of people who’ve made a significant amount of money through short selling and making investments that seem to go against the grain.  

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ABOUT THE AUTHOR

Based in Austin, TX, Steven is the Executive Editor at CoinCentral. He’s interviewed industry heavyweights such as Wanchain President Dustin Byington, TechCrunch Editor-in-Chief Josh Constine, IOST CEO Jimmy Zhong, Celsius Network CEO Alex Mashinsky, and ICON co-founder Min Kim among others. Outside of his role at CoinCentral, Steven is a co-founder and CEO of Coin Clear, a mobile app that automates cryptocurrency investments. You can follow him on Twitter @TheRealBucci to read his “clever insights on the crypto industry.” His words, not ours.