5 Ways Of Short Selling Cryptocurrency

The article will focus on the rising success of Futures Market, Margin Trading and other popular ways of selling cryptocurrency. 

What is Cryptocurrency?

To put it simply, a cryptocurrency is a digital currency that is secured by an encryption technique, which makes it possible to set up a secure session between two parties and keep information private. Unlike fiat money, cryptocurrency is not issued by a central body; cryptocurrency networks are based on the organizational methods called blockchains. These are used as a digital ledger to integrate transactional data and make it more secure.

A distinctive feature of cryptocurrencies is that they are created via the mining process, and thus are not limited to any national jurisdiction. Bitcoin mining is so competitive that miners try one’s best to acquire expensive and specialised ASIC mining cards and PPS+ mining pools.

How To Sell Cryptocurrency?

Margin Trading

A common way of selling cryptocurrency is margin trading. It is by far the most popular method among traders since it allows them to buy more stocks than they can afford and thus profit from margin funds. To do this, traders borrow funds from others willing to earn interest in a trade. 

When a margin trade is initiated, the trader is required to commit a percentage of the total order value. This process is known as the margin; margin trading is a good method of profiting from Bitcoin fluctuations and creating leveraged trading. 

Futures Market

Just like other types of financial contract, futures allow a trader to sell or buy an asset at an agreed price and on a predetermined date. However, the final price of an asset can vary due to seasonal variations, which can dramatically affect the outcome of the deal. 

There are two types of futures participants:

  • Speculators. These are traders who make a profit from a security’s price change;
  • Hedgers. These traders aim to reduce the amount of volatility associated with the change.

Using margin provides leverage; the size of leverage corresponds to a specific deposit put by the trader. Thus, traders don’t need to spend much of their capital as an initial investment. The maximum leverage size is set by an exchange, and very often commission is provided.

Binary Options Trading 

A binary option is a financial contract that allows the buyer to purchase an asset and the seller to sell an asset at a specified strike price. A call option grants the holder the right to buy a stock, whereas a put option to sell it. In comparison to other financial contracts, option contract obliges the holder to trade their side if the other party executes the option and vice versa. Options contracts are used for both hedging and speculation strategies. However, the costs and risks of binary trading options are higher than many other forms of shorting, which makes binary trading the least preferred type. 

Short-Selling Assets 

Another way of speculating with Bitcoin is going short. The main concept of short-selling is buying an asset and selling it back at a lower price. It is important to note that this type of short selling is risky. If an investor is going short, there is no 100% guarantee that an asset will necessarily increase in value. In contrast, when going long on a stock, an investor is exposed to risk only the money they have invested. 

Advantages of Short Selling

  • hedging;
  • greater profits.

Disadvantages of Short Selling

  • no limit to the loss;
  • bankruptcy risk(for the company);
  • margin interest;
  • opportunity cost.

Today, investing in Bitcoin is a very risky venture. Before starting to invest, participants should estimate the probable outcome of the deal; it’s super important to learn the basics — and get familiar with the patterns that can help you spot a good short.

SEO

Leave a Reply

Your email address will not be published. Required fields are marked *