5 WAYS TO SHORT BITCOIN IN 2018

The options to short bitcoin are mostly through unregulated exchanges, and very risky given bitcoin’s volatility. Not to mention it hasn’t exactly been a good year for bitcoin bears given the 10-fold surge in price. But for those daring enough to try, there are ways to bet against bitcoin’s rise.

Here are 5 ways you can short bitcoin;

Margin Trading
This method is very similar to shorting a stock. One of the easiest ways to short bitcoin is through a cryptocurrency margin trading platform. Many exchanges allow this type of trading, with margin trades allowing for investors to “borrow” money from a broker in order to make a trade. It’s important to remember that there may be a leverage factor, which could either increase your profits or your losses. Many Bitcoin exchanges allow margin trading at this stage, with BitMex, Bitfinex, and Plus500 as some popular options.

Futures Market
Bitcoin, like other assets, has a futures market. In a futures trade, a buyer agrees to purchase a security with a contract which specifies when and at what price the security will be sold. If you buy a futures contract, you’re likely to feel that the price of the security will rise; this ensures that you can get a good deal on the security later on. However, if you sell a futures contract, it suggests a bearish mindset and a prediction that bitcoin will decline in price. According to the Merkle, “selling futures contracts is an excellent way to short bitcoin.” Futures markets are somewhat more difficult to find, but CBOE, CME, OrderBook.net and OKex has been known as places to buy and sell bitcoin futures.

“All the options to short in common markets are becoming available in the bitcoin market,” said Charles Hayter, co-founder of market tracker CryptoCompare.

Binary Options Trading
Call and put options also allow people to short bitcoin. If you wish to short the currency, you’d execute a put order, probably with an escrow service. This means that you would be aiming to be able to sell the currency at today’s price, even if the price drops later on. Binary options are available through a number of offshore exchanges, but the costs (and risks) are high.

Prediction Markets
Prediction markets are another way to consider shorting bitcoin. They have not been around in the cryptocurrency world for long, but they can nonetheless be an asset for shorting currencies like bitcoin. These markets allow for investors to create an event make a wager based on the outcome. You could, therefore, predict that bitcoin would decline by a certain margin or percentage, and if anyone takes you up on the bet, you’d stand to profit if it comes to pass. Predictious is one example of a prediction market for bitcoin.

Shorting Bitcoin ETNs
Investors can also indirectly bet against bitcoin by shorting exchange traded notes with exposure to the cryptocurrency, like Stockholm-based Bitcoin Tracker One, and Grayscale Investments LLC’s Bitcoin Investment Trust. The risk is that these notes don’t always trade in line with bitcoin, so the exposure won’t be perfect.

There’s pretty good liquidity for shorting bitcoin. The main difference with shorting the Nasdaq for example, is it will be a lot more volatile, so there’s a lot more risk. The rate to borrow will also be a bit higher.