Bitcoin price crashed by 50% in one month in May 2021, reminding the world that the direction in crypto prices isn’t always and “only up.” It was among the worst one-month selloffs on record. It was also a reminder that markets are volatile, and none more so than cryptocurrencies.
Buying Bitcoin has been incredibly profitable for most since its early inception. Long positions over the last year have led to enormous gains. But let’s not forget that the most profitable trading strategy over the last four years of crypto market price action has been to short Bitcoin and altcoins.
The bearish trend might not be here to stay, but here’s how to short Bitcoin while the crypto market takes a breather and resets.
What Is Shorting Crypto?
Everyone in crypto talks about HODLing, and why everyone needs to wait to “buy the dip.” However, there’s a lot more ways to make money trading crypto aside from the traditional buying and selling strategy. There’s also long or shorting crypto assets like Bitcoin or Ethereum.
Shorting crypto involves essentially placing a bet that the price of cryptocurrencies will go down, and profiting from that bet through a derivative product called CFDs. CFDs stand for contracts for difference, and let traders settle the contract at the difference in price from the time the contract is open and closed.
Why Go Short BTC?
Those involved in Bitcoin generally want prices to go up, so why then would anyone want to short BTC? The crypto market is a highly speculative asset class that results in unprecedented price volatility. Markets don’t just go up only, they crash, they correct, and they consolidate.
Shorting Bitcoin lets traders profit from those phases, and not just uptrends. There’s no need to wait around for markets to recover to begin making money again, and in some cases, BTC-settled contracts can also lead to successful short positions adding to your crypto holdings.
By going short crypto at resistance or when greed is at extremes, traders can hedge against any potential corrections and make money rather than lose it.
How To Short Bitcoin
Shorting Bitcoin still requires strategy, even more so than simply buying and HODLing. Shorting Bitcoin on leverage requires risk management strategies, technical analysis for position planning, and much more. Getting a good read on the market is a must before going short – just blindly opening a short could lead to losses or getting stopped out.
To build a plan, utilize the free charting tools provided by PrimeXBT in partnership with TradingView. Using the tool, anyone can plot support or resistance, find trendlines, or look for sell signals on the dozens of technical analysis indicators included.
Such sell signals include a bearish MACD crossover, the RSI reaching overbought levels, a twist in the Ichimoku cloud, and much more. A blog with detailed guides and trading tips is also offered by the award winning trading platform.
Once several signals are revealed, a trader can go short and set a stop loss above the resistance level chosen. Take profit orders can be set to ensure that any unrealized gains are booked and added to your bottom line. The same technical indicators can also be used to know when to close short positions manually or go long instead.
Trade CFDs On PrimeXBT
CFDs are derivatives that let traders go long or short on crypto, add leverage, stop losses, and much more. PrimeXBT is an award-winning trading platform that offers more than 50 different CFDs under one roof. The list of trading instruments includes top crypto assets like Bitcoin, Ethereum, Litecoin, and more; major and exotic forex currency pairs; all of the most popular stock indices; and commodities like gold, silver, oil, and more.
If you still struggle to get the hang of shorting Bitcoin on PrimeXBT, there’s also the Covesting copy trading module that lets newcomers become followers, and copy the trades of top-ranked strategy managers in the Covesting leaderboards.
Regardless of which market you are interested in, there’s something for everyone and opportunity around every corner. And with markets more volatile than ever before, having the flexbiity and arsenal offered at PrimeXBT at your disposal can mean the difference between profits and losses.