Along with the feverish excitement around Bitcoin there is also a consistent hum of skepticism. If you’re on that side there are several ways to short Bitcoin. Short selling has always been a risky way to profit, but in the hands of advanced traders, it is a tactic that can prove very profitable.
Bulls might call you crazy given Bitcoin’s rocket like trajectory the last year, but if you’re set on the short, here’s how to get started. You have multiple options for shorting on Bitcoin:
The simplest way to short bitcoin is to use a crypto exchange. If you’re familiar with Bitcoin you’ve likely already set up an account at an exchange. GDAX, Kraken and Bitfinex are some prominent exchanges that allow shorting options.
As of December 10th 2017, you can short Bitcoin through futures trading. The launch of Bitcoin futures has the finance traditionalists interested. With futures trading, there is now a way to engage with Bitcoin through an established process like futures.
INDIRECTLY SHORT BITCOIN
You can also take a more creative route to short bitcoin by betting against exchange traded notes that are plugged in to cryptocurrency like Grayscale Investments Bitcoin Investment Trust (GBTC) or Bitcoin Tracker One. The caveat is that these funds do not always mirror the trajectory of Bitcoin.
CONTRACT FOR DIFFERENCE (CFD)
If you want to short Bitcoin without actually having to purchase it, go the CFD (Contract for Difference) route which is based on a derivative. Essentially you can enter into a contract with another party speculating on the price of Bitcoin. This method is available at CFD platforms like ThinkMarkets and eToro. Unfortunately, CFDs are not available in the USA.
You can borrow cryptocurrency from your broker to set a short position using margin trading. There is always a collateral requirement in margin trading and that percentage can vary. Bitfinex allows this type of trading and requires 30% equity. This type of trading is already risky in the traditional institution, so implementing it in conjunction with Bitcoin is a bold tactic.
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