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How to Invest in Short Cryptocurrency? Guide for beginners and experts

by William Kane
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How to Invest in Short Cryptocurrency? Guide for beginners and experts

Crypto assets are volatile, they can crash anytime. Hence, short cryptocurrency or shorting is a term in stocks and is also used by crypto users. The term means borrowing securities and selling them in case the price continues to drop. 

When one shorts cryptocurrency, prices will likely drop even lower and can be bought at smaller prices. This profit-making technique is counter to the normally employed crypto techniques in which coins are sold at higher prices than they’re bought. This method involves numerous risks and should be used adequately. 

Shorting is beneficial when a cryptocurrency company’s decline is imminent, the experts are certain that the assets will crash, or to hedge against potential losses in one’s cryptocurrency portfolio. Investors borrow assets at a particular price from brokers when they want to short a stock. 

Later, the crypto user will sell those assets in the open market and expect their prices to drop. When they drop, the user will buy them at lower prices and give them to the broker while pocketing the profit gained from the difference in their original and recent prices. 


Investors often use contracts for difference (CDs) and future contracts, instead of brokers in cryptocurrency. Short cryptocurrency is an advanced trading strategy, hence risky and needs a certain level of skills and experience. The crypto user must have a solid understanding of market trends, risk management, and price movements before investing. 

Ways to do Short Cryptocurrency 

Here are some ways to do shorting;

Margin Trading 

One of the easier ways to short Bitcoin or other cryptocurrencies is through margin trading. In margin trading, the investor borrows money from a broker to make a trade. The borrowed or leveraged assets can increase the profits or exuberate losses, controlling a larger portion.

 The brokers and exchanges allow margin trading. For instance, one has $300 in their account but has to invest $1100. They will borrow the $800 from a broker or crypto exchange and sell it when the prices leap. The $800 will be returned to the broker after it’s sold, the remaining amount will be the profit. 

Kraden and Binance are popular for Margin trading. 

Futures Market 

Investor purchases a security with a contract in which the selling price and the time of selling the assets is specified. The one who buys future contracts is optimistic that the prices will hike and he’ll make a profit. The purchase of security with the contract ensures that one can get a good deal from it. 

Short bitcoin futures contracts can be accessed from the Chicago Mercantile Exchange (CME; the world’s biggest derivatives exchange platform), eToro,  TD Ameritrade, Kraken, and BitMEX. Perpetual contracts (no fixed positions to roll them) of Bitcoin are also available on BitMEX. 

Operating CFDs 

A contract for difference or CFD is a special contract in which the difference in the value of assets while it was bought and sold off defines the profit. Utilizing CFDs as a short cryptocurrency, one can infer whether prices will rise or dwindle without owning the assets. 

Likewise, with futures and options, the buyer can make a profit even when the prices are dwindling. However, if the market turns in favor of investors, it could incur huge losses for the investor. Usually, CFDs have costly fees and higher risks. 

To learn about whether you should buy cryptocurrency options or not? We have a detail guide for you.

Binary Options Trading 

Buying options is another form of short cryptocurrency in which assets one executes a put order with an escrow service. It means that the investor will sell the options at the original price even if the cost of the assets drops. Deribit and OKEx offer binary trading options. 

Binary options are available at various crypto platforms, however, one must be aware that they’re highly risky and expensive. The benefit of binary options trading is that the losses are restricted by choosing not to sell the options. The losses are restricted to the price spent while putting options.  

CFDs offer leverage of 2:1, allowing larger portions to the investors with small proportions of capital. However, CDs are not regulated in the United States, yet crypto users can use them as crypto has yet to be regulated in the States. 

Prediction Markets 

Prediction markets are similar to stocks, as investors can develop an event to bring a wager ascertained on the outcome. For instance, if someone has placed a bet that Bitcoin or any other crypto platform will suffer the loss of a certain percentage or margin and someone takes this bet on.

 If it passes, the person who made the claim will pocket the profit. Augur, GnosisDAO, and Polymarket are popular platforms where one can make predictions and earn profit. 

Considering this, people ask about investing in Gateex Cryptocurrency. Like other crypto investment, Gateex is also having it's signals to invest.

Inverse Exchange Traded Products 

Inverse Exchange-traded products are bets that imply that the price of the underlying assets will slump. They are similar to and utilize future contracts in convergence with other derivatives to procure return products. 

The United States residents have access to only one inverse exchange-traded product, ProShares’ Short Bitcoin Strategy ETF (BITI). Canadian investors can utilize Bitcoin Inverse ETF (BITI), while the European Union can invest in 21 Shares Short Bitcoin ETP. 

Is Sorting Short Cryptocurrency Safe?

Short Cryptocurrency or shorting isn’t for novices, as it involves complex and sophisticated trading strategies like futures, options, and leverage trading with high risks due to ever-changing trends. Unlike shorting, long trading involves speculations when the asset’s price will soar up. 

If an investor isn’t careful before doing shorting, they could suffer losses and find it impossible to repay their debts. In case the market trends change to a worse condition, the crypto exchange platform managing their investment may cash out their position to get the loan back. This could leave them with less money than they already had. 

Cryptocurrency like Binance often tests their users before they indulge in shorting cryptos to make them understand the complicated products they are employing. 

There is no investment advice in this article, hence one must contact a financial manager before investing. If there are any queries regarding, how to best in short cryptocurrency, inquire in the comments. 

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