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Can I Short Bitcoin – Basic Information to Have First

Before finding out ‘can I short Bitcoin’ you first need to know everything you can about the term ‘shorting’ or ‘short selling’. Just like everything else in the crypto space, shorting is also a complex process and concept.

Unless you know the details, you cannot opt for it as it is likely to complicate the overall experience for you and cause you financial losses as well. This is why, it is important that you take your time and do a research where you can get the major and important aspects of something as crucial as shorting.

Bitcoin shorting is an exciting and interesting thing to opt for but it can be more suitable for you if you first get the important information mentioned below.

Can I Short Bitcoin – What is Shorting

Shorting or short selling is an investment style that is mostly opted by people who are not so optimistic about the long-term success of a digital asset, which is Bitcoin in this case.

This is a suitable option for such investors because it offers the chance of getting profits if the price of the asset drops. Since the crypto space and Bitcoin’s price is quite volatile, it can present numerous opportunities for people who want to long or short it.

However, this is not all to the concept of shorting. If you are interested in Bitcoin shorting then there are more details you need to know before you begin.

How it Works?

‘Can I short Bitcoin?’ can be easier for you to determine if take a look at how it works and what the mechanism is behind the whole concept.

In simple words, shorting allows you to borrow a financial instrument or digital asset such as Bitcoin. Once you borrow it you can sell it at its current price. If the trade goes well, you will also have to pay back the person you borrowed the asset from.

The chances of the trade going well can be high if the price of BTC drops after you short it. It will also make it more budget-friendly for you to pay back the person you borrowed from in the first place.

Take an Example

Any idea or concept can be understood better and in a detailed way if you consider an example. Similarly, here we will take an example of Bitcoin shorting to properly understand how it works.

For instance, you are interested in shorting BTC. For this purpose you borrow two Bitcoin when the price if $18k each. This means that you now have two borrowed Bitcoin that cost $36k.

Now let’s suppose the price drops to $17k and you close your position when the price of the borrowed assets is $34k. This will be possible if you re-buy the 2 Bitcoin at a lower price.

Considering this your profit will be $2,000 if you subtract $36k from $34k.

Risk Management Tips

While learning ‘can I short Bitcoin?’ you should also explore how you can do so with minimum risks and inconveniences. As mentioned above, the crypto space is volatile and there can be risks that you face whether you are buying, trading or shorting Bitcoin.

If you are inexperienced in anything related to the crypto space then you should take your time and explore a few helpful tips.

If you are interested in Bitcoin shorting then you can have a better experience if you first understand the risks and then know the tips on how you can manage them.

Shorting does increase the chances of risk. If you generally invest in BTC and its price drop, you will only lose the amount that you initially invested. However, if you short BTC you will lose double the amount that you invested. This depends on the shorting ratio that you opt for.

Now, if you want to have a somewhat successful experience you need to know how you can manage such risks. Most traders use stop-loss function while shorting or longing. This is a cut-off point that is implemented if the trade does not go well in your favor.

3 Steps to Take for Shorting BTC

Knowing ‘can I short Bitcoin?’ also includes you knowing about the three simple steps that you will eventually have to follow.

Here are the steps you need to know.

  • Choose and signup with a suitable exchange and deposit your Bitcoin.
  • Look for an opportunity for Bitcoin shorting.
  • Execute your order.

Final Takeaways!

The question ‘can I short Bitcoin?’ can be answered more efficiently if you know what shorting is and some relevant factors as well. As an interested short seller, you should first know the details mentioned above.

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