/ Short-Sell Bitcoin - Make Money When Markets Crash

February 20, 2018

Short-sell Bitcoin - make money on crypto market crash

Cryptocurrency market has seen a meteoric rise, and I think we can all agree that whatever goes up, must come down.

There is a lot of hype, with boosters saying Bitcoin could reach $100k+ in the next several years, and more and more financial institutions are accepting Bitcoin for payments, but are the glory days of the Cryptocurrency King Bitcoin behind us?

“Shorting” the crypto, you can actually profit when any investment, including Bitcoin, drops in value. 

Past few months, Bitcoin has caught huge amounts of media and mainstream attention, with the world’s biggest investors and players in the investment world, among with everyday traders entering the crypto game. It has indeed shown that it can be very profitable, but the people who made the most money, were the people who invested in a single or double-digit Bitcoin back in 2013. 

$1 Bitcoin investment at the very beginning, would be worth more than $1.5 million today.

You may have missed your boat for buying or mining Bitcoin, but that doesn’t mean you can’t still make money off Bitcoin’s price drops. If you are a skeptic about the industry or a specific organization, this is exactly where you fit in.


/ WHAT IS SHORT-SELLING?


Short-selling allows you to basically borrow an asset, such as Bitcoin, and sell it at current prices. Later on, you can purchase the Bitcoin to pay back the company you borrowed from. Hopefully, when you repurchase Bitcoins, prices will have dropped, and the assets that need to be paid back will be cheaper to purchase.
For example, if you short 10 Bitcoins when the price is $10,000, you get $100,000 worth of BTC. If price of Bitcoin drops to $5000, you repurchase 10 Bitcoins back to give back to the company you borrowed from at $5000 per BTC, and you have made $50,000 profit.

It is all about the timing and active, fundamental research. Short-selling is a high-risk venture, as it can bring much bigger losses than classic asset investment. If the price of those 10 BTC you borrowed surges 2000%, you’re in deep trouble. Only invest if you are very confident that prices will drop and you have the money to cover your losses if the investment price rises. Make sure you watch the prices closely and cut your losses if price starts to rise too quickly, and feels like it is not going to stop anytime soon. That being said, if your moves were right and prices do drop, to 0 hopefully, you are probably very, very rich.

There are many factors that will trigger major sell-offs, such as failure of major exchanges, political regulatory actions, failure to complete the roadmap or discovery of, in this case, Bitcoin’s code exploits which threaten wallet security or network operation


If there is a project you believe will definitely fail, is fraudulent or a scam, do your research well and make money when it goes to zero. There are few ways to make a profit by betting against Bitcoin


/ DIRECT BITCOIN SHORT-SELL


The simple way of short-selling without actually borrowing. You sell off your Bitcoin at a price you choose, hope it will fall further, then buy it back at a lower price.


/ BITCOIN MARGIN TRADING


In my opinion, it is the best option. You borrow crypto from a broker, make the trade and hope for the best.

There are several Bitcoin and Cryptocurrency exchanges that allow margin trading at this point, with many more incoming in the near future, including Binance, the leading cryptocurrency exchange.


/ BITCOIN FUTURES


You can short-sell Bitcoin in the futures market. A future is basically a contract where you, as a buyer, agree to buy Bitcoin at a future date at a certain fixed price. You are predicting (and hoping) that the price of Bitcoin will go up. When your contract expires, you can buy Bitcoin below the market price.

You can read this Forbes article how Wall Street fixed a big problem for Bitcoin - its volatility.
With futures contracts coming from big players such as CME Group Inc., Cboe Global Markets Inc., and Nasdaq Inc., it will get even easier.


/ TREAD LIGHTLY


We are still in the early phase, but shorting will be more popular in the years to come, and if you believe the crash/bubble burst is coming, you can make money by betting on its decline. You can check our Cryptocurrency Investing Mindset article and read more why I think the crash is inevitable and how to play it smart.

The kind of volatility Bitcoin has had the past few months, you don’t even have to wait for a crash to profit. One day it is $12,000, and next $6,000. Even with smaller flunctuations, you could make a hefty profit playing your cards right.

As I said, this is a high-risk investment, and learning how to short-sell Bitcoin or any other cryptocurrency is not an easy task - it is much easier said than done. It takes a lot of dedication to research and willingness to take risks and gamble, because short-selling in most cases is just that - gambling. I am not a financial expert, nor this is financial advice.


If you have any other short-sale investment strategies, options or any kind of alternative, please feel free to share in the comment section.

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