As the cryptocurrency market becomes more and more widespread, new prospects for investment arise. Bitcoin is the most renowned and, essentially, the first cryptocurrency that came into existence. As of now, the cryptocurrency market is worth millions of dollars, with Bitcoin being the most expensive – almost $9,700 as of 2020.
However, this wasn’t the summit for Bitcoin. At the beginning of 2018, Bitcoin rose to prominence and was valued at almost $17,000 per BTC. Unfortunately, with increased regulations and slowed cryptocurrency trading caused the market to plummet to $3152 in December 2018. While this decline was detrimental to many brokers, it was an opportunity for others to short-sell their Bitcoins.
In this article, I will explain what short-selling means and how you can short-sell Bitcoin to optimize your chances of a profit.
WHAT IS MEANT BY BITCOIN SHORTING?
In simple words, Bitcoin shorting is selling your cryptocurrency in the anticipation that it decreases in value and you can purchase it again at an inexpensive cost.
For instance; assume that you own 1 BTC that cost you $10,000 to purchase. However, you notice that the value is declining progressively. You sell your 1 BTC for $9,500 and wait for the price to drop further. After a few weeks, the value is decreased to $4,750. Now, you can purchase 2 BTC. When the value begins to increase again, you can sell those 2 BTC for, say, $18,000. Therefore, you ended up earning twice as much as your initial investment.
Traders and brokers use this strategy often to profit from market differences. Short-selling acclimates the simple mantra, “buy low, sell high”. Essentially, the trader or broker buys crypto-currency at a low cost and sells it at a significantly higher one.
HOW TO SHORT BITCOIN?
Now for the thing you’re here for; how do you short Bitcoin? We’ve explained this in four simple steps that you can implement for this stratagem.
Any investment stratagem requires that you comprehend what you’re doing. As such, short-selling requires that you have adequate wisdom of the market and the strategies. Cryptocurrency is based entirely on randomization – it’s unpredictable! As the market for cryptocurrency is still rather new, it can be exhilarating and excruciating to trade.
Bitcoin was debuted as the internet’s decentralized currency in 2009. It has no authority that operates it. It is a currency for the internet, made by the internet. Therefore, the cost of Bitcoin fluctuates on countless unknown factors. It is important to understand what you’re doing before going all in.
CHOOSE YOUR METHOD:
As a part of the rule of thumb, predict your outcome and choose accordingly. There are numerous methods of short-selling Bitcoin, but there are two common ones; traditional short-selling and derivatives trading.
REMINISCE THE RISK:
Any trading strategy entails a certain risk. Obviously, you want to hop on the short-selling bandwagon too, but remember that there are risks. Bitcoin is always fluctuating, therefore, there’s no way to tell how much the market can drown or elevate you.
If you sell your Bitcoin when the cost is decreasing, there’s no certainty that it will decrease even further. It could summit or plummet by thousands of dollars in an hour! Therefore, you should be prepared to confront these risks when short-selling.
We can’t stress on this more; always remain alert! As mentioned above, Bitcoin is an unpredictable currency. Its value depends on countless unknown factors! However, there are some known factors as well, including; supply, public awareness, incorporation into the routine, and the increasing regulations against the cryptocurrency market.Once you’ve decided on the method and understood the currency, it’s time to monitor the market. Be aware of any changes that can cause the value of Bitcoin to increase or decrease, and act accordingly. You can’t expect any surplus if you don’t monitor your cryptocurrency thinking some opportunity will knock on your door. Seriously, this is a fundamental rule to any investment.