How to Short-Sell Bitcoin

11 Min Read
Last Updated July 23rd 2021

In 2009, Bitcoin (BTC) shuffled into our financial world, invisible and unimportant to most of us. Back then, who could have imagined digital currencies ever becoming 'a thing.'

Initially, Bitcoin growth was uninspiring. Nobody gave Bitcoin any attention as investment potential. But from the early days, Bitcoin growth was steady, and the savvy investors began to get involved.

In 2017, Bitcoin's price stayed around $1,000 for most of the year. From humble beginnings, the price seemed rather a lot back then. Then, suddenly, Bitcoin began to creep up.

In October 2017, the price of Bitcoin reached $5,000, and then in November, it was $7,000.

Then, suddenly, Bitcoin reached for the stars.

By December 2017, the Bitcoin price hit just under $20,000. Crypto experts suggested that Bitcoin price could go as far as $100,000.

But it didn't. The BTC price started sliding back and, by the end of 2018, the Bitcoin price was a puny $3,500.

Bitcoin didn't do much for a year or two, but it did appear to be steadily rising. The trouble now was that many people had lost money when the Bitcoin price dropped. In 2017, they naively bought Bitcoin at a high price and sold it for a significant loss. Ah, the joys of inexperienced traders and investors.

But Bitcoin had a few surprises in the bag. This year, 2021, the Bitcoin price rose to an incredible $64,000, then promptly dropped $30k in a matter of days. Oh boy.

Elon Musk's announcement of a ban of Bitcoin transactions for Tesla vehicle purchases didn't help the price of Bitcoin, which fell 10% the day after his statement.

Elon has taken umbrage with the effect that Bitcoin mining has on the planet, and quite rightly so. Bitcoin mining requires massive energy resources, and we believe it cannot be sustainable long-term.

In 2018, Elon Musk owned 0.25 BTC.

But, Financial Express suggests that Elon bought $1.5 billion BTC in February 2021. And, despite his statement, Elon Musk is holding on to his substantial Bitcoin.

This man knows how to make (a lot of) money, so make of that what you wish.

Recently, the cryptocurrency Industry and financial experts suggest that Bitcoin could rise to $360,000 by 2025. Is this possible? Who knows. But, one thing is for sure, and that is the fact that we can rely on Bitcoin for some crazy highs, followed by spectacular lows.

Right now, governments have no control over Bitcoin, though we imagine they would very much like to change that. As a decentralised currency, Bitcoin can do as it wishes.

Many financial markets crashed with the emergence of the Covid-19 pandemic in early 2020. As economies struggled and many businesses closed down, Bitcoin continued to rise steadily during 2020/2021.

Betting Against Bitcoin

Why short-sell Bitcoin? Isn't it risky to short such a volatile currency?

Well, let's look back to this year. The price dropped by $30k in a matter of days. Had you been short-selling Bitcoin, you'd have made a fortune, especially as a prominent investor.

Had you have been holding on to Bitcoin, you may have felt a little concerned.

Are the Glory Days of Bitcoin Over?

In 2017, Bitcoin finally got to go to the ball.

Bitcoin was in the headlines, all over the mainstream press every day. Financial experts and Bob, the builder, were all predicting future price rises.

Many big investors got involved with Bitcoin and waited for an opportunity to sell at a higher price. Some investors may have held Bitcoin for several years, waiting for the perfect moment to gain from selling Bitcoin.

We ask again, why is Elon Musk holding on to his enormous stash of BTC? What are his financial advisors telling him?

How high will Bitcoin go, and where can we find an opportunity to sell Bitcoin?

Many millionaires made their fortune with Bitcoin in 2017. Erik Finman, for instance, invested in Bitcoin when the price was a mere $12.

In 2014, Barry Silbert purchased 48,000 Bitcoin at $350 each. If he had sold at the latest 2021 high of $64k, he would have gained $3,072,000,000. Not bad for a $16,800,000 investment.

Equally, many people lost a lot of money from Bitcoin with uneducated trading or investing. They blamed Bitcoin for being unreliable, but Bitcoin was doing what Bitcoin always does. No surprises for the educated Bitcoin investor.

You don't make money from Bitcoin by holding it forever.

You have to know when to buy Bitcoin and when to sell.

The principle is to buy low and sell high. But nobody knows what price is low for Bitcoin? When do you sell Bitcoin, and how do you know when to hold Bitcoin to wait for a better price to sell?

Check Out: Bitcoin Price Predictions

Is Bitcoin the Next 'Big Short'?

Undoubtedly, the historical price behaviour of Bitcoin since 2009 demonstrates that when Bitcoin hits a big high, the price usually crashes down. That's an opportunity for investors and traders, not a negative.

You can profit from selling Bitcoin when it decreases in value. But you do need to know what you are doing.  In 2017, people jumped into Bitcoin with their savings anticipating great wealth in a matter of days or weeks. Uneducated investing is a sure way to lose your money.

To short sell Bitcoin for a profit, there are a few guidelines to follow.

Many financial analysts claimed that Bitcoin prices weren't sustainable and that a crash was inevitable. They must have felt pretty smug when the Bitcoin price dropped from almost $20k to $3,500 within a year.

But now, are those financial analysts eating their hats, or are they still proclaiming that Bitcoin cannot go any higher?

Governments across the world are scrutinising investments in cryptocurrency and Bitcoin exchanges. Some governments may have likely invested in Bitcoin as a way to boost profits. But that's just our opinion, and we don't know it for a fact.

Naturally, governments are concerned about tax avoidance - what a shocker. If there were a way governments could regulate Bitcoin, the entire crypto world would turn on its head. But let's not think about that. Instead, let's find out how you can short-sell Bitcoin.

Read Also: Bitcoin Trends

Options for Short-Selling Bitcoin

If you want to know how to short-sell Bitcoin, here are a few options:

Direct Short Selling of Bitcoin

To sell Bitcoin directly, you must sell at a profitable price. If Bitcoin drops further, you can buy again, wait for the price to rise, and sell again for a profit.

Margin Trading of Bitcoin

You can use a trading platform that offers margin trading for Bitcoin.

Margin is a bit tricky for beginners to understand, and it is better suited to intermediate and experienced traders or investors. With margin trading, you are borrowing money from your broker. You make the trade and hope that it pays off with a profit.

If it doesn't pay off, you end up with a loss, and if you used margin, it could be more than expected.

There are many Bitcoin exchanges offering margin trading but, do proceed with caution.

Futures Trading of Bitcoin

You can short sell Bitcoin in the futures market. A future is a contract with an expiry and settlement date. You agree to buy Bitcoin at a fixed price at a future date, predicting that Bitcoin price will rise. The theory is that when the contract expires, you can purchase Bitcoin below the market price.

BTC futures expire on the last Friday of the month.

Below are Bitcoin Futures settlement dates for 2021. On expiration day, open positions are settled at a price determined by the exchange. The settlement price is calculated as the average of the price index every second over the last hour before delivery (between 7 AM and 8 AM UTC)

  • June – settlement 28th  June
  • July – settlement 2nd August
  • August – settlement 30th August
  • September – settlement 27th September
  • October – settlement 1st November
  • November – settlement 29th November
  • December– settlement 3rd January 2022

Binary Options Trading of Bitcoin

Another way to short sell Bitcoin is with options trading. It's a form of contract. You agree to 'put' which gives you the right to sell a chosen amount of Bitcoin at a price and time of your choice (the strike price).

As Bitcoin loses value in comparison to the strike price, the put option gains value. You aren't under obligation to sell the option unless you wish to.

With a 'call' option, it's the opposite scenario. You can buy Bitcoin at a specific price until the expiration date.

Don't Miss: Bitcoin Trading Tips to Follow

Get Started Short-Selling Bitcoin

Experienced investors and traders have made a lot of money from short-selling Bitcoin. The opportunity is always there, but it's easy to get it wrong if you don't know what you are doing.

Bitcoin is highly volatile. You may think you have to wait for the extreme price shifts to profit from short-selling Bitcoin. But, this isn't necessarily the case.

You can easily short sell Bitcoin from the smaller price fluctuations. You just need to know what you are looking for.

Without trading or investment education, selling Bitcoin is nothing but a gamble. But with a foundation of trading knowledge, it's not difficult to short sell Bitcoin for a profit.

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Virtual currencies are highly volatile. Your capital is at risk.

Read More:

Is Bitcoin Mining Still Profitable?

How Much Power It Takes to Create a Bitcoin

Bitcoin Facts: Top 7 Surprising Facts You Didn't Know About

Bitcoin Price Prediction for 2025 and 2030

15 Reasons Why You Should Invest in Bitcoin Today

What Are The Best Alternatives to Bitcoin?

FAQs

Is it too late to buy Bitcoin in 2021?

Bitcoin will likely stand the test of time. Today (4th June 2021), the Bitcoin price is $36,965.70. It's a price outside of most members of the public. If you plan to buy to short-sell it later, this wouldn't be the best price to buy Bitcoin. Crypto experts suggest that Bitcoin may hover between $30 - $60k throughout this year.

How do I know the best price to buy Bitcoin?

If you have zero investment or trading education, learn to read the charts. Although Bitcoin is volatile, it still mostly respects support and resistance, and like all price action, there's a kind of roadmap for what may happen with Bitcoin. It's easy to think, oh yes, Bitcoin price is going up to $360k by 2025. But how about it it doesn't?

How do I know the best price to sell Bitcoin?

Buy low and sell high. There's no set place to sell Bitcoin. The main thing is that you sell at a price that gives you enough profit relative to the risk

What will Bitcoin Price be in 2025?

Crypto experts are suggesting the possibility of Bitcoin reaching $360,000 by 2025. Nobody knows for sure because we don't know what the future brings. If cryptos were delisted or regulated, the entire world view of crypto could reverse

Please note that the above information is not providing advice on tax, investment, or financial services. We provide the above information without consideration for risk tolerance and a specific investor's financial circumstances.

Trading or investing in cryptocurrencies may not be suitable for all investors. It does involve risk and the possibility of a loss of capital.

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