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Author: Admin | 2025-04-28
While many investors look to buy bitcoin in anticipation of its price increasing, other investors look to profit from bitcoin falling in price. The strategy to profit from a decline in bitcoin’s price is called shorting or short selling. In this article, we provide an overview of the different ways to short bitcoin and highlight the risks involved. Can You Short Bitcoin?Bitcoin can be shorted through a variety of direct and indirect methods including margin trading, derivatives, and bitcoin exchange-traded funds (ETFs). Short selling, or “shorting” bitcoin allows investors to profit from price declines. As Bitcoin gains prominence in mainstream finance, the number of ways to short bitcoin has increased.What Is Short Selling Bitcoin? Short selling bitcoin is an investment strategy that allows investors to profit from the decline in bitcoin’s price. Shorting involves borrowing bitcoin when its price is high, selling it immediately at the current market price, and then buying it back later at a lower price. To close the short trade, the investor returns the borrowed bitcoin and pockets the price difference as profit. Critics of bitcoin often say that bitcoin is worthless or going to zero, yet many refuse to short it and profit from their conviction. ➤ Learn more about Why Does Bitcoin Have Value?Long Position Versus Short Position“Long” and “short” positions represent two fundamental trades that investors can take when they trade securities or commodities like bitcoin. Taking a long position means buying bitcoin with the expectation that its price will rise. Conversely, a short position involves borrowing bitcoin to sell at the current price, hoping to repurchase it cheaper if the price falls. Both strategies are speculative and reflect different outlooks on bitcoin’s future price movements. Can You Make Money Shorting Bitcoin?In theory, short selling bitcoin can be as profitable as taking long positions. For example, if you short sell and the price of bitcoin falls by $10,000, your profit could be the equivalent to what you would have earned from a long position if the market had increased by $10,000. However, shorting bitcoin carries tremendous risk as outlined below.What Are the Risks of Shorting Bitcoin?Shorting bitcoin comes with risk as the asset is relatively volatile in fiat terms due to its short history — it has been around for only 14 years. Price swings can happen often, leading to substantial losses, especially when leverage is involved. If bitcoin’s price rises instead of
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