How Would Shorting Bitcoin Work?

Due to Bitcoin’s volatility shorting Bitcoin is a very risky but possibly very profitable move. There are several ways in which you can profit from this.

  1. The simplest and most intuitive type of short is direct – you sell your existing Bitcoin and hope that the value will continue to drop. At the point you chose, you can buy Bitcoin again, at a lower price, earning the difference between two prices. Of course, the price could go up, and you can lose your money or never try to buy sold Bitcoin again.
  2. Many people short sell Bitcoin by using a margin trading platform. This means dealing with a broker and not with any kind of user willing to buy off your Bitcoin. You, as an investor can “borrow” money from a broker in order to make a trade. Because you are borrowing something, there is an interest charge involved in addition to other fees.
  3. The third option is to short sell Bitcoin in the futures market. You agree to buy Bitcoin at a date you decide, in the future, at a certain fixed price, hoping that the price of Bitcoin will go up so you can earn money. When your contract expires, you buy Bitcoin at a previously agreed price and then you can sell it at a market price which is hopefully higher.
  4. You could use some of the online gambling sites called prediction markets. Users create personal bets on changes in Bitcoin’s value by a certain percentage. If anyone takes you up on that bet, you’ll profit if it comes to pass.

In conclusion, for you to profit, you need to do some research and be prepared to take some risks. Track carefully changes in Bitcoin value and find the short selling option that best suits your needs.



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