How to Short Bitcoin: The Ultimate Guide 2025

If you sell 1 BTC for $30,000 and the price decreases to $27,000, you stand to make about $3,000 profit, as opposed to $1,000 if you had not leveraged your account. Next, we’ll explain the mechanics of shorting with easy-to-follow examples and also introduce some advanced techniques traders use to earn extra gains from BTC downturns. At PrimeXBT, you will enjoy a user-friendly interface, attractive trading fees and a high leverage. PrimeXBT also provides you with several metrics to make your trading experience easier. Moreover, crypto analysts argue that price movements are not random, but they rely upon a trend.

Step 5: close your position

Margin trading allows traders to borrow funds to increase their position size, using leverage to amplify potential profits. Leverage ratios can vary from 2x to 100x, meaning a trader can control a position much larger than their actual investment. While leverage can significantly increase profits, it also magnifies losses, making risk management in trading essential.

The benefits include high leverage, which equates to low margin requirements, making it ideal for short selling Bitcoin. To enter into a short position, you have to borrow cryptocurrencies and trade them on an exchange platform at their current prices. You will have to repay back the capital you borrowed to make your trade; hence you have to buy the cryptocurrency at a future date.

Can You Make Money Shorting Bitcoin?

The common expression « buy low, sell high » references a basic long position. Conversely, the reverse would be true for those short-selling the asset. In this next installment of our beginner’s guide to cryptocurrency trading, we’ll introduce the concept of short-selling Bitcoin. The information we present here will be beneficial for crypto traders wanting to expand their available toolset and for those attempting to make gains during a sustained bear blockchain exchange traded funds market. Bitcoin has a futures market where a buyer agrees to buy security through a contract.

• The data used to conduct this analysis includes the historical performance of an asset.
• Binary options are all-or-nothing trades, meaning you either win a predetermined amount or lose your entire investment.
• However, with great potential reward comes great risk, especially in the world of Bitcoin shorting.
• Unlike futures or margin trading, leveraged tokens allow you to short Bitcoin and other cryptocurrencies without the risk of liquidation or the need to monitor a maintenance margin.
• Conversely, the reverse would be true for those short-selling the asset.
• Margin trading allows traders to borrow funds to increase their position size, enabling them to trade more Bitcoin than they own.

How to Develop a Crypto Trading Plan?

Before you settle on the best strategy that works for you, ensure that you understand the market trends and consider factors such as regulations in the country where you are based. If you bought 3 BTC and the market crumbles, you would still have 3 BTC at the end of the day. You can choose to HODL and wait for a price gain that could actually happen sooner than later, and you will be back to making profits. Next, use the middle panel to analyze the BTC price action and come up with a trading setup, i.e., the price at which to buy and when to sell. You also want to select a price at which to exit the trade in the event that your trade starts showing a loss. As the name suggests, inverse Bitcoin ETPs are specialized instruments that track the price of BTC with a twist.

What Is Short Selling Bitcoin?

In some cases, there is even the possibility of leverage shorting, which is very similar to margin trading. This allows you to carry out larger trades even if you do not hold the necessary funds. The downside of leverage is that your position may be closed sooner than you expect by the exchange. Bitcoin and cryptocurrencies, in general, are usually ranked as highly-volatile assets due to unexpected price movements. Volatility affects long positions, and traders that have held Bitcoin and expect the prices to fall can use short-selling to hedge against the risk.

About shorting Bitcoin

The other popular way to short Bitcoin is contracts for difference (CFD). CFDs function like leverage trading, where a broker will allow you to bet on the price movement of Bitcoin without actually owning Bitcoin. This lowers the risk of holding an asset whose value is highly volatile.

While they are similar, there are key differences that should be noted and understood. Futures trading, CFDs and shorting on leverage are not allowed in some jurisdictions due to regulatory restrictions. All these transactions will automatically be handled by the exchange or broker, you just set up the limits and stop-losses.

However, this long-term price appreciation hasn’t happened without sharp drops and several bearish phases along the way. Both these platforms have extensive features, not only in crypto but also in traditional investing. It is important that when your goal is to short Bitcoin you sell CFDs rather than buy them. These CFD Brokers offer users the simplest and quickest way to start shorting Bitcoin as well as other popular cryptocurrency.

As we will explain in later sections, there are several ways to short Bitcoin, depending on your risk profile and knowledge of the marketplace. These include margin trading, CFDs (contracts for difference), options, futures trading, and investing in inverse leverage tokens. Bitcoin futures trading took off around the run-up in cryptocurrency prices at the end of 2017.

Tips for shorting Bitcoin

• If the market moves in the trader’s favour and the price of Bitcoin falls, they buy back the Bitcoin at the lower price, return the borrowed amount, and secure a profit.
• The latter ensures that you get to borrow the BTC at the exact time that you are opening the position.
• The other limitation is that regulators are yet to wrap themselves around the concept of cryptocurrencies.
• To trade Bitcoin CFDs, you are required to deposit a section of the funds on your trading account.
• When shorting with Bitcoin assets, you must wait for the market to recover and increase in value and price.
• Overleveraging occurs when traders use too much leverage, which can lead to significant losses if the market moves against them.

To short-sell Bitcoin, you’ll need a trading account and a clearly mapped-out trading strategy. When you short BTC or any other cryptocurrency, an exchange will perform the necessary steps behind the scenes on your behalf. However, it’s important to know these steps and the process for you to understand how shorting BTC works.

To trade Bitcoin CFDs, you are required to deposit a section of the funds on your trading account. This will act as cheapest way to buy bitcoin a guarantee that you can buy the cryptocurrency at the price you are placing your bet on. After borrowing Bitcoin, you hold it as you wait for the value to decline. Your profit will be the difference between the borrowed amount and the sold amount. Due to the concept of borrowing, you should consider that you are exposed to limitless losses. When you enter into a contract with the broker, you will have a number of days after which you need to repay the borrowed amount.

This method involves selling bitcoin at a high price and repurchasing it when the price drops. This approach to short selling bitcoin is accessible for beginners, eliminating the necessity to familiarize oneself with trading platforms. Additionally, it carries a lower risk, as the potential loss is limited to the amount you invest.

We do not recommend specific products or providers, however may receive a commission from how to add bitcoin to your isa and profit tax the providers we promote and feature. Typically, taker fees are higher than maker fees as you’re removing liquidity from the market instead of providing additional tradable funds. If BTC falls 10% and your profit target is hit, you stand to make approximately $1,000.

Keep in mind that this works both ways, and losses will depend on how you manage your risk and stop loss. If you’re interested in shorting Bitcoin but are concerned about the risk, you can get a much better understanding of it by using OKX’s demo trading account. Under « Assets, » select « Start demo trading » to enter a few test positions to see how they perform. You can later move to real markets when you feel comfortable with your knowledge and skills. As mentioned, exchanges like OKX make shorting cryptocurrencies very straightforward.

That month, the SEC approved 11 spot Bitcoin ETPs that can be used for shorting Bitcoin. You can learn passive and active investing strategies through a crypto trading course. Prediction markets—while not necessarily shorting—are where you place bets on the outcome of events. Prediction markets in crypto are similar to those in mainstream markets. In both cases, you profit when Bitcoin’s price falls below the strike price before the option expires.

If you aim to short sell Bitcoin directly, you have options to choose from, including Coinbase Pro, Localbitcoins, and Binance. A trader using margin trading to short BTC will typically borrow the assets from their broker, sell and buy them back at a later date when their value has (expectedly) fallen. They will thus make a profit by pocketing the difference between the sell and buy price of the borrowed coins.