1. Sell BTC holdings
Most people know how to invest in an asset when they believe it will increase in value: just buy the asset and wait for the rise in price. But they may not know there are ways to make a profit when they expect the asset will decrease in value: namely, short sell the asset.
When used correctly, shorting can also help with auxiliary trading functions, from tax management to risk management. On the other hand, if one were to guess wrong and the asset one shorted went up in price, one would lose money. And since an asset could theoretically go up in price infinitely, one could also theoretically lose an infinite amount of money.
Here are some of the avenues one could use to go short on Bitcoin. Technical analysts use charts to help decide when they should go long or short on an investment. The below chart shows what that particular pattern looks like. This approach entails borrowing a set amount of an asset and then selling it immediately. If the price of the asset then drops, one can then buy it and return the same number of the asset one originally borrowed to the broker who lent them in the first place.
The graphic below shows how this process works with traditional investments like stocks; BTC short-selling works much the same way. The Bitcoin Investment Trust lets people invest in Bitcoin going either short or long without needing to buy the actual cryptocurrency.
Periods when investors are busily buying or selling shares of the fund will likely also cause discrepancies because this tends to throw off how the fund performs compared with BTC itself. An option contract lets you purchase the right to buy or sell an underlying asset at a specified price by a specified future date.
Buying a put option on BTC or selling a call option on it can allow traders to bet that its price will decrease in the future. If you buy an option contract, you pay a premium to the party selling the contract.
Futures contracts are a legal agreement to buy or sell an underlying asset for a specific amount on a specific date. In a Bitcoin futures contract, the buyer commits to buying a certain amount of BTC at a certain price on a predetermined date, while the seller commits to selling that amount of BTC to the buyer at that price on that date. These contracts were created to protect buyers and sellers from price fluctuations on commodities like wheat, oil, and precious metals.
Today, traders can get futures contracts on a wide range of different assets — including BTC. A contract for difference CFD is a type of futures contract, but instead of trading actual bitcoins when you settle the contract, you just trade fiat currency. The buyer and the seller of the contract agree to settle any change in the price of BTC in fiat currency on the date the contract ends. Some CFDs will let parties exit the contract early if they choose.
For example, if a trader were a few days into a short CFD contract and the price of BTC were soaring, the trader might decide to cut their losses and buy out the contract at the current price of BTC rather than waiting out the full week. Prediction markets let users predict and bet on the outcome of certain events. Shorting Bitcoin can grant a few special advantages above and beyond the obvious.
Shorting lets traders keep trading whether you believe the market is headed up or down. If a trader has reason to believe prices will decrease instead of increasing, the trader could potentially increase their profits by shorting Bitcoin as opposed to a hodler approach. Holding both long and short positions on different but similar assets diversifies a portfolio, which reduces overall risk. For example, different cryptocurrencies often move roughly in parallel. Taking short positions has the potential to reduce tax bills by helping to manage capital gains.
During bull markets, finding capital losses to balance out capital gains can be a challenge. Shorting can serve as a way of cancelling out taxable gains in such a market, which is particularly useful in the case of short-term capital gains these are taxed at a higher rate than long-term capital gains. Tax planning is a complex subject. Consult an experienced and licensed tax adviser before proceeding with any tax-related strategy. Active crypto traders can greatly benefit from understanding the full suite of strategies for shorting.
Shorting, when managed correctly, can reduce investment risks. The above references an opinion and is for informational purposes only. It is not intended as and does not constitute investment advice, and is not an offer to buy or sell or a solicitation of an offer to buy or sell any cryptocurrency, security, product, service or investment.
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Why short-sell bitcoin?
Look, everyone has their own reasons for choosing their favorite cryptocurrency exchange. Now, I may be new in this space, but the one thing I know for sure is that some exchanges cheat to attract more attention. And they are not being transparent about it. High volume does not necessarily mean that the exchange has high liquidity. OKex is one of these exchanges at the center of this controversy uncovered by Sylvain Ribes , a trader and crypto-market analyst.
2. Short-sell BTC
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When you buy a bitcoin, the loss is capped at the amount that you have bought the coin. Due to its anonymous nature, authorities are concerned about the tax avoidance possibilities. With short selling cryptocurrency exchange put option cryptocurrenct, you have the right to sell a specified amount of Bitcoin, which you set, at a certain price at a certain time. Investing Bitcoin. SFOX Follow. While this might not appeal to all investors, cryptocurreency interested in buying and selling actual bitcoin could short selling cryptocurrency exchange the currency directly. When it reaches a price you feel comfortable with, you can then sell it and then pocket the profit. With a short, traders can be left on the hook for many times their original position if prices rise. LendingBlock already has pilots under way with Octagon Strategy, http://trackmyurl.biz/how-to-trade-bitcoin-australia-2328.html crypto brokerage firm in Asia, Japan-based crypto exchange Quoine, and Genesis Capital, one of the big U. IG is not a financial advisor and all services are provided on an execution only basis. Key Takeaways For those looking to sell short Bitcoin, to earn a profit when its price falls, there are a few options available to you.