The volatile nature of cryptocurrency makes profiting a bit dicey. You can see your future investment yield significant profits and go dust within a twinkle of an eye. However, many analysts believe that if you understand how short selling works in stocks, you should be able to turn around the volatile nature of the crypto market to favor you. It makes sense, but can you short crypto? Let’s find out. Today’s casino news will highlight major things about shorting in Crypto.
Can You Short Crypto? The Crypto’s Volatility Buster
“Shorting” is about borrowing and selling based on a convincing market analysis. Crypto shorting means borrowing and selling crypto assets, but not without a motive. The motive is to repurchase the coin when it decreases in value, repay the assets you borrowed, and then keep the difference to yourself as profit. So, the basic steps of “Shorting in Crypto” are: Borrowing, selling, waiting for a fall, and then buying again. The waiting period can be long or short.
Let’s look at an example.
The price of Bitcoin reached over $20,000 in mid-2022, but it eventually dropped to about $16,000. Assuming you anticipated the crash and borrowed one bitcoin for $20k, which you promptly sold for $20k, you would now have $20k on hand.
Thus, when the price dropped to $16,000, you used your $20k to purchase Bitcoin. You then sent back one Bitcoin to cover your debt, making a profit of $4,000. Your earning $4k in profit demonstrates that you can short cryptocurrency.
Nowadays, there are a few ways to engage in crypto shorting. You can leverage tokens, futures, Margin trading, crypto CFDs (Contract for difference), etc. The easiest among them is arguably Margin trading, but it also has risks.