How to Short Crypto in 2024: Guide to Shorting Bitcoin and Other Cryptocurrencies

Investing in cryptos can take various forms: P2P trading, Mining, and various other methods that made their proof, but have you ever heard about Crypto Shorting or short selling?

That is exactly what we are going to talk about in today’s article, so prepare yourself to delve into the great world of shorting crypto.

What is Crypto Shorting?

In simple words, crypto shorting is making money with the price of crypto when it goes down. It starts by getting an online broker where you can borrow the crypto you want to trade and then sell it at its current market price. Once sold, you wait for its price to go down, and you buy the same amount of the cryptocurrency back at this lower price, then you return the borrowed cryptocurrency.

The difference between the buying and selling price is your profit. Now that we know what shorting crypto is, let’s see how do you short crypto, starting with Bitcoin.

How to Short Bitcoin?

Bitcoin is the best cryptocurrency to invest in today for short-term revenue and also represents a good choice for shorting. Let’s not wait any longer and see how to short sell Bitcoin:

• Understand the Market: Before seeing how to sell Bitcoin short, it's crucial to understand the cryptocurrency market's volatility and the factors that influence Bitcoin's price. This includes economic indicators, market sentiment, and global events.

• Choose a Trading Platform: Select a cryptocurrency exchange or trading platform that offers the ability to short sell crypto.

• Consider the Fees and Interest: Be aware of the fees and interest rates associated with borrowing Bitcoin to short. These costs can eat into your profits, especially if you hold your position for a long time.

• Make the Borrowing: Borrow the quantity of Bitcoin you want to trade.

• Sell It at Market Price: Once you have borrowed the Bitcoin, sell it at its currency price by using a P2P platform such as Cryptomus or a crypto exchanger.

• Wait for the Price to Go Down: Wait till the price of the Bitcoin drops lower than the selling price, then buy the exact amount you borrowed and give it back.

Congratulations, you just made money with short-selling Bitcoin; keep in mind also that the opposite can happen. That is why you should be careful and always invest what you are willing to lose.

How Do You Short A Cryptocurrency?

The answer to the question of how to short a cryptocurrency is quite simple: you just need to follow the same steps as in the Bitcoin shorting:

1. Choose the crypto you want to short
2. Understand the market
3. Choose a trading platform
4. Consider the fees and interest
5. Make the borrowing
6. Sell it at market price
7. Wait for the price to go down
8. Buy the same amount and pay back the borrowing

What Crypto Exchange Allows Shorting?

In the crypto sphere, various crypto exchange platforms offer the opportunity to short sell crypto, including Cryptomus.

With Cryptomus, you will have the opportunity to short sell cryptos by using its trading spot. To use it, you will need to follow these simple steps:

1. Create An Account: Go to Cryptomus, create an account by using your Google, email or phone number, pass the KYC verification, and enable the 2FA security feature.

2. Trading Spot: To have access to the Cryptomus trading spot, go to your account’s Dashboard and click on Personal wallet. Once on the page, click on Convert then Spot.

3. Spot Interface: Once on the Spot page, scroll down, and you will see a graphic where you can select and track the market value of the crypto you had chosen for shorting. Below the graphic, you have a panel where you can select the limits and choose if you want to buy or sell.

Note that Cryptomus offers only the Spot feature, allowing you to buy and sell. It doesn't offer any crypto borrowing service.

What are the Risks of Shorting Crypto?

To write a good article about how to short crypto, we also need to talk about the risks because, like all crypto investing strategies, shorting crypto involves them too. Here are the main ones:

• Market Volatility: The cryptocurrencies are very well known because of their colossal instability and volatility, making their value go up or drop quickly, and this unpredictability can lead to substantial losses for those shorting.

• Interest Costs: Borrowing assets to short cryptocurrency involves interest costs, which can accumulate over time, especially if the position is held open for a long period and more interest means less profit.

• Liquidity Risks: In some cases, especially with less popular cryptocurrencies, liquidity might be too low to sell at desired prices, making you wait longer and also lose the drop opportunity.

• Unlimited Losses: Unlike other traditional trading strategies, the short trading crypto is based on borrowing, selling at market price, and buying cheaper when the value of the crypto drops, but if the value of the crypto doesn't drop and keep increasing, losses can exceed the initial investment. It is similar to bleeding: if not stopped in time the losses will increase unlimitedly.

What are the Benefits of Shorting Crypto?

Now that we have seen how to short crypto, the risks you will face, and what the best crypto exchanges for shorting are, let’s talk about the benefits of this strategy:

• Profit from Market Downturns: One of the main advantages of shorting crypto is the fact that it allows you to make money from price drops, unlike traditional ways that involve making a profit from the value increase of the asset.

• Arbitrage Opportunities: The shorting crypto allows you to put in place arbitrage strategies where you can exploit price differences between different exchanges or markets.

• Potential For Quick Profits: With the high volatility of the cryptocurrency market, prices can fall much faster than they rise, allowing you to sell higher and pay back your borrowing cheaper, making money from the margin.

• Skill Development and Market Understanding: Starting the short trading crypto strategy will allow you to gain more knowledge about the market and the way crypto prices change, and this will enable you to know how to make other strategies and diversify your investment.

Is Crypto Shorting Legal?

In short words, the short cryptocurrency is legal in many parts of the world. Still, it's subject to the regulatory environment of each country and the policies of each trading platform or exchange.

Regulatory Environment

• Country-Specific Regulations: Some countries accept cryptocurrencies without problems, others don’t, but in general, there are always restrictions and rules that help the countries gain control over them, and the shorting crypto trading is also under the regulations depending on the country and its policies.

• Restrictions and Bans: Some countries also put severe restrictions on cryptocurrency trading and all that involves crypto.

Trading Platform Policies

• Exchange Regulations: Cryptocurrency exchanges, where short selling typically occurs, operate under the legal framework of the countries in which they are based. Consequently, an exchange might offer short selling in one country but not in another, based on the local legal requirements. Before engaging in short selling on any platform, it's essential to review the exchange's policies and ensure they comply with your local laws.

• Compliance and Risk Management: Good trading websites take steps to follow finance rules. They check who their users are and watch out for any odd trading. This helps make sure that the website and its users, including those betting on prices going down, are not breaking any laws.

Here we are at the end of this article that was about how to short crypto. We hope you enjoyed it. You can leave us a comment below and share with us your thoughts about this topic.