shorting bitcoin

How to Short Bitcoin with 4 Top Brokerages

Shorting bitcoin allows you to profit when the market is going down.

While learning how to short bitcoin properly gives traders some significant advantages, there is a learning curve that comes with it.

Across different exchanges, the process involved will vary slightly.

Today we’re going to look at 4 of the best brokerages that you can use to open a short position on Bitcoin.

What is shorting?

Before we dive into the different platforms, let’s talk about the basics of what short selling is.

Short selling is a tactic used by investors who believe that the price of bitcoin is going to decline.

We’ve all heard of the timeless “Buy low sell high” trader advice, and with short selling, this advice goes into action. Investors can enter a future’s contract, a marginal trade with leverage or a binary option to pick up on these gains.

Shorting in simplest terms is when an investor borrows funds to sell Bitcoin at its set price and but it back at a lower price to pay back the lender and end with profits on a decline.

Example: If you believe Bitcoin could drop from a value of $10,000, then you could borrow $10,000 and buy a Bitcoin and sell it immediately. Then when it drops to $6,000, you can repurchase it and give the lender their bitcoin back. That means you now have $4,000 in profit on bitcoins declining market value.

There’s a danger with this example that you may already see. If the value of Bitcoin goes from $10,000 to $14,000, then you’ll be stuck $4000 and at a loss. Unless you’re dealing with a direct person, you’ll be borrowing from a collateralized lender, meaning your position will get liquidated before you “owe” money to the lender.

This means you’ll lose your entire investment before bitcoin dropping under the loaning threshold. This is known as liquation. It’s not a very fun word to have thrown at you because it means your account has hit $0.

Best Short Selling brokers

If you aren’t an institutional investor, and only have access to retail accounts, then you’ll want to use a brokerage. With “contracts for difference” accounts or CDF’s, you can make bets on bitcoin without buying the asset. Just be careful not to get liquidated!

eToro

Source: Investopedia

3 Reasons to love eToro:

  • 15 Supported Coins
  • Free Virtual Platform
  • Over 10,000,000 users trust it

eToro supports some of the top currencies giving you a variety of different coins to choose from, such as Bitcoin, Ethereum, Bitcoin Cash, Ripple, Dash, Litecoin, Ethereum Classic, Cardano, IOTA, Stellar, EOS, NEO, Tron, ZCash and Tezos.

eToro allows users to try out the platform with virtual money, so they can tell how good they’d be with marginal trading. No one should ever marginal trade right off the bat. It’s essential to understand the rules of the game before sparking transactions fully.

You aren’t the first person to use this platform, and that’s a good thing. Over 10,000,000 people worldwide are using eToro.

Fee Break Down

Source: eToro

The spread structures are based on market liquidity and change as more volume is brought in or taken out, so you should check before creating a transaction.

eToro has a few more fees that are transparent and clear when signing up.

Withdraws – are always free BUT do require a minimum withdrawal amount of $50 to be made.

Wallet fees – When adding cryptocurrency to your eToro wallet, you’re only charged the blockchain fees and not by the platform. If you need to convert any cryptocurrency to another asset, you’ll pay a 0.1% fee to convert successfully.

4 easy steps to placing a short with eToro:

Step 1:

Go to the official eToro site and click “Join now.”

Step 2:

After signing up, you’ll want to go into the platform and search for Bitcoin on the top search bar.

Step 3:

Now you’ll be able to select your preferred parameters. You can change your leverage and stop loss figures, depending on the risk you’re willing to take. Notice that we are on “SELL” since we’re shorting. If you were to long, you would simply select “BUY.”

 

Step 4:

You can now review your trade and click “Open Trade” to officially become a bear! eToro does an excellent job of reminding you what your fees will be in association with the time.

Example: Daily and Weekend Fess.

BitMex

Source: BitMEX

3 reasons to try BitMex:

  • The MOST liquid brokerage in the world
  • Funds are held in cold storage
  • High leverage for marginal trades

BitMex has completed over $1.19T in the last 365 days. That’s right — $1,190,000,000,000 worth has been traded in just a year, while over $112B has been traded in a month. That’s a lot of cash.

BitMex holds the deposited funds in cold storage wallets so that hackers can easily tap into it. Considering the utmost security, BitMex has a small-time window for hacks as they only release funds once a day. To this date, no bitcoins have gone lost through intrusion or hacking.

BitMex allows users to trade with leverage that includes:

  • 100X Bitcoin
  • 20X Bitcoin Cash
  • 20X Cardano
  • 20X EOS
  • 50X Ethereum
  • 33X Litecoin
  • 20X Ripple
  • 20X Tron

These high leverages explain why it was able to transact over a trillion dollars in a year.

Fee Structure

Source: BitMEX

BitMex has a lot of different fees that fluctuate with the liquidity of the market, so it’s imperative to visit the fees page before making a trade.

Withdrawing – BitMex does not charge any fees for depositing or withdrawing but does have minimal amounts that must go through a  transaction based on the current standing of the market.

Funding BitMex does not charge any fees on funding paid or received that’s incurred with the perpetual contracts.

4 intermediate steps to placing a short with BitMex:

Step 1:

Simply Sign up on the official site and click “Register” to create an account.

Step 2:

You’re going to need to deposit BTC to start trading. It’s strongly recommended that you secure your account with second layer authentication so that money will not be stolen.

Step 3:

After funding your account, you’ll get this seemingly scary window. Don’t worry; we’ll make it easy with 6 small steps. The first step is to click on Bitcoin and perpetual swapping.

Then you’ll notice we’re on “market,” we want to switch over to limit, so click that. We then want to enter in the amount of USD to be traded and at what bitcoin price.

Click the red “Sell Market” box and select the amount of leverage you’re looking to trade with.

Step 4:

Once you continue and start your order, you’ll be able to see that it begins as soon as Bitcoin hits the limit price that you requested. You’ll be able to close your position at any time.

Plus500

Source: Investopedia

3 Popular reasons to try Plus500

  • Added Crypto Index trading
  • Low minimum entry to join
  • Easy to use trading integrations

At Plus500, you can Buy and Sell indexes of cryptocurrencies with the Crypto Volatility Index and Crypto 10 Index.

Since Plus500 uses fiat deposits, there’s a minimum of $100 to open an account. This minimum deposit is a low minimum to enter as some other competitors require up to $1000 to make a trade.

$100 can get you 1.30 leverage, which means you’ll have the buying power of $3,000 with only $100!

Plus500 is perfect for those who want simple “Buy” and “Sell” clicks. The interphase is much easier to navigate and understand than BitMex, and their customer support is superb.

Fees

Plus500 has a pretty straight forward fee structure. The rates at which the fees are charged can change due to the market. This volatility in rates makes it essential to look at the going rates before trading.

Withdrawing- Plus500 will only charge a fee of $10 if more than 5 withdraws are made during a month.

Inactive fee- There’s a fee of $10  if you don’t log into your account at least once in three months, so if you don’t plan on being very active, make sure you set a timer on your calendar to log.

4 easy steps to placing a short with Plus500:

Step 1:

When you go to the official site, you’ll be hit immediately with a “Start Trading Now” option. Click that and begin the journey!

Step 2:

On the left, you’ll see a “real money” box, after clicking that you’ll get a “Deposit” option under the >Funds section.

Step 3:

After depositing your fiat funds, you’ll want to head over to the left side of the platform and click on “Trade” and then “Crypto Currency.”

Step 4:

After you select Bitcoin, you’ll have a trading window on the right that has to enter in the fundamentals that you want to associate the trade with. You can enter in the number of contracts you’re looking to sell, and if you’re going to add any advanced trading methods like “closing at profits” or “close at loss.”

After clicking the blue “sell” button, you’re good to go, and your trade is now live.

Binance

Source: Binance

3 reasons to investigate Binance

  • Easy to learn and use
  • Popular exchange/brokerage
  • Competitive pricing

Binance has very clean interphase making it easy to navigate no matter what your experience level is with cryptocurrency. Binance also has its official help guide on creating a marginal trade, which is extremely helpful to read.

Binance is one of the first exchanges to allow marginal trading, and it’ll enable most US residence to use the platform.

Binance has remained very competitive with these pricing structures, that allow anyone to be able to marginal trade viably. Many other platforms have complicated fee structures or have ridiculous pricing.

Fees

Withdraw- There are small fees associated with withdraws that depend on the withdrawal method. Check the official website for accurate fee pricing.

Deposits: There are no deposit fees.

4 easy steps to placing a short with Binance

Step 1:

Simply visit the official site and click “Register.”

Step 2:

When you’re in your marginal trading account, you’ll see Bitcoin and an option for “borrowing/repaying.”

Step 3:

You’ll now be able to select the fundamentals that you are looking for, such as the amount of Bitcoin, and leverage.

Step 4:

After clicking “Confirm Borrow,” you’ll be able to see your live transaction and be able to track your marginal trades. Success!

What is the best brokerage to use?

There isn’t a “best” brokerage account because they all have different qualities that could be useful.

All four brokerages are currently not available to most US residences along with other territories, and so if you’re from the restricted areas, then you shouldn’t be using it. Don’t try using a VPN, you will get caught, and they can liquidate your positions. BitMex has a longer interphase learning curve, so if you’re trying to hit the ground running, you might want to choose a platform like Etoro.

Etoro and Plus500 don’t allow you to add as much leverage as BitMex, and so if you’re looking to make HUGE gains, then BitMex might be the answer for you.

Etoro and BitMex allow you to deposit cryptocurrency, while Plus500 only gives you a fiat option, which might be helpful to investors who don’t even want to deal with obtaining the digital assets.

Each of these brokerages has heightened security and offers high liquidity for marginal trading, and so the question of what platform to use should be based on your countries governmental policies and your reasoning for using marginal trading.

I’m new to cryptocurrency, should I short?

It’s never recommended to jump right into shorting or even longing when you’re a beginner. When marginal trading, you can easily get liquidated and lose your entire investment if the market takes a rapid turn.

Example: If you 100x short bitcoin on BitMex, if bitcoin drops 0.5%, you’re liquidated and will lose your entire investment. Most professional traders don’t go over 25X.

If the market is high, should I race to open a short position?

If investors tell you to “buy low and sell high,” then you might think that if a currency is “high,” it should automatically be shorted. If this were the case, then everyone would be rich because they’d pile money into shorts when the market moves up.

It’s dangerous to base your investment decision on something fundamentally fixed, like “automatically” or “at this point.” If a cryptocurrency’s real value is less than its real value, you must ask yourself a crucial question “What’s stopping this currency from continuing to be over evaluated?”. Just because a coin has gone up a large percent, doesn’t mean it will always come down hard and could very quickly spike up.

Conclusion

Marginal Trading and Shorting is a great power, but with this power comes great responsibility. So please, short with care!