The possibility of making a profit by short-selling Bitcoins intrigues numerous investors to take the risk. But is it an effortless process? Investors keep wondering how to short Bitcoin in the most convenient way possible. Well, in simple terms, short-selling is the process of buying Bitcoin when the price is low and selling it when the price hikes. The problem is, this simple procedure is highly complicated to maneuver. Many factors influence shorting Bitcoin, and investors need to take care of every aspect to make money from it. Let us understand how to short Bitcoin and when is the perfect time to do the same.
Table of Contents
How To Short Bitcoin: Learn Effective Ways
One can use different strategies to learn how to short Bitcoin. The fundamental and technical analysis of the short-selling process helps us understand the effective ways to apply these strategies.
Use The CFD Method
CFD (Contract For Difference) trading means shorting Bitcoin by creating a contract between two traders, wherein they both agree to pay/receive the price difference. So, if a buyer forms the contract when the price of Bitcoin is INR 5 lakh, and the price hikes up to INR 10 lakh, the buyer has to pay INR 5 lakh (the difference).
Go For The Direct Sales
If one wants to learn how to short Bitcoin most easily, they should go for direct sales. It means one can buy Bitcoin when the prices are low and then sell them when the market rises. This process is less risky when a trader knows how to judge the market conditions.
Choose Margin Trading
Investors who do not have any monetary backup can utilize a margin trading strategy to short Bitcoin. In this case, traders can borrow money from brokers and use it to buy Bitcoins and then sell them in a short period to make more money. This process is extremely risky as one may have to repay the money from his pocket if the market does not pick up!
Use Futures Trading Method
Every investment industry has a futures market, and the Bitcoin market is no exception to it. Here, investors who are learning how to short Bitcoin buy a futures contract with the expectation that Bitcoin prices will rise in the future. So, when the contract expires, they can buy Bitcoins below the market price and sell them at the prevailing rate.
Try Prediction Market
Prediction markets allow investors to predict the rise and fall in the prices of Bitcoins. This market is not preferable for beginners as they are less likely to understand the nature of the market. It can be a risky move as they are still learning how to short Bitcoin.
The Binary Options Trading Method
Binary options trading has two ways of short-selling Bitcoin, “put” and “call”. The put option allows an investor to sell Bitcoin at a certain price even when the price changes in the future. Call option lets them buy Bitcoin at the said price until the predefined expiration date of the Bitcoin.
Know The Perfect Time To Short Bitcoin
The perfect time to short-sell Bitcoin is when an investor is sure that he can sell the “borrowed” Bitcoin at a lower price. Traders can become successful by finding trends and following the market condition without compromising their strategies. It is crucial to do the technical and financial analysis before making any move. The critical people have a higher chance to succeed as short-seller.
Investors can choose any of the given ways to learn how to short Bitcoin. But if there are any doubts and confusions about taking the risk, it is better to take the help and assistance of a certified advisor. Shorting Bitcoin is beneficial only when one becomes successful in analyzing the process.