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Monday, May 27, 2024

Best Way: How to Short Bitcoin in 2022

If the Bitcoin price (BTC) falls, those who bet their cards on Bitcoin Shorting, i.e. bet against the price of Bitcoin, benefit the most. We explain how this works.

The long-lasting sideways phase of Bitcoin and the entire crypto market has now turned into a severe correction. Bitcoin is no longer struggling to reclaim $40,000 but is instead seeking its bottom towards the $30,000 level. You can find out here how you can still benefit if you bet on short positions .

Bitcoin shorting with bitcoin futures

Bitcoin futures, also known as “futures contracts”, offer the opportunity to place bets on the price of Bitcoin . You agree with a contractual partner that you will sell him or her Bitcoin (or other assets ) at a certain price at a future date .

A futures short position is created when you sell the futures contract. The seller guarantees that he will deliver the BTC (or satoshis) at the current price on the agreed date. He assumes that the price will fall by then. If the Bitcoin price is below the price at the start of the agreed period of time, the seller makes a profit.

A distinction is made between conventional Bitcoin futures and those that are physically secured. With the latter (known, for example, from futures provider Bakkt), Bitcoin is also “physically” deposited for each contract . With the conventional Bitcoin futures (Chicago options exchanges CME and CBOE ), this option falls flat.

Contracts for difference: Contract for Difference (CFD)

If this is not risky enough, you can try contracts for difference. Here, two parties agree to exchange performance for interest payments. You have to deposit a security ( margin ).

The buyer of a contract for difference agrees to pay the seller the difference between the current bitcoin rate and the future predicted bitcoin rate . Unlike the Bitcoin futures, however, no future date is agreed here, they can be closed at any time. With CFDs, it is not necessary to actually own the Bitcoins , only the Bitcoin course developments or their differences are traded here.

However, there is not only the risk of total loss. Rather, there are still so-called “obligations to make additional payments”: If the bet turns out unfavorably, you have to add more. For private investors , however, these additional payment obligations do not apply. However, if the margin is used up, the CFD platforms must close the open positions immediately.

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