How And Where To Short Bitcoin On Margin

bitcoin short tradingShort selling is an advanced trading or investment strategy, which speculates that a given asset or currency, in our case Bitcoin, will drop in price. Only experienced investors and traders should apply it.

Portfolio managers or investors can use shorting selling or “shorting” as a hedge against a long position’s risk in the same or a related security. Traders can use it as speculation. Hedging is more common as a transaction, where risk exposure is reduced by placing an offsetting position.

The Details of Shorting

In shorting, one opens a position by borrowing shares of an asset that they think will decline in value by a certain date in the future. This is known as the expiration date. Then, the trader sells these shares to entities who are willing to pay the market price. The trader bets that the price will keep dropping before the borrowed shares have to be returned and they can buy them at a good price. In theory, shorting carries unlimited risk since any asset price can climb indefinitely.

Short Bitcoin in Spot Market Trades on Bitcoin Exchanges

To short BTC on exchanges in spot market trades, you may be required to already own Bitcoin. On platforms, only slight leverage may be used.

Which Cryptocurrency Exchanges Allow Bitcoin Shorting?

In this section, we’ll discuss three of the most popular exchanges that allow Bitcoin shorting. They are Kraken, Binance, and eToro.

Binance

Bitcoin shorting on Binance

Binance allows Bitcoin as well as altcoin shorting by margin trading. You have to deposit Bitcoins or USDT (Tether). Users can short with USDT by borrowing the BTC they are selling. One way to do this is by borrowing BNB tokens to sell upfront using a margin trading account. Should the price of BNB drop thereafter, as you have predicted, it’s possible to buy the tokens back at a lower cost and generate a profit. Users using BNB as base currency in their account get rewarded with lower fees.

Leverage of Binance Coin Margin Trading

Binance Coin margin trading is not available on all cryptocurrency exchanges. The ones that do allow it offer margin modes of up to 2x, where you can borrow just 1 BNB to short by pledging crypto assets equivalent to 1 BNB as collateral.

Binance offers margin modes of 3x and 5x. With the latter, you can borrow 4 BNB to short by pledging crypto assets equivalent to 1 BNB as collateral. The former mode allows you to borrow 2 BNB to short by pledging crypto assets equivalent to 1 BNB as collateral.

You need to transfer crypto assets to use as collateral before you can borrow BNB. These are sent to your margin wallet. The amount of collateral one must pledge is determined by the margin mode applied and how many BNB they want to short.

Kraken

How to short Bitcoin on Kraken

Kraken allows Bitcoin shorting with only fiat balance with fees settlement also in fiat. So you can short Bitcoin on this platform even if you don’t have any BTC balance. Kraken offers up to 5x leverage for spot market trades.

The platform even has Futures (Derivatives) where BTC can be shorted with up to 50x leverage. The large US-based Bitcoin exchange is open to US traders, too. But citizens and residents of the USA can only perform spot market trades with up to 5x leverage – unfortunately they are excluded from Futures trading and high leveraged derivatives of any kind.

Read more about Bitcoin margin trading in the USA.

eToro

eToro Bitcoin broker for short trading

71% of retail investor accounts lose money when trading CFDs with this provider.

Please note: Shorting with eToro is not available in the USA.

eToro has both spot market trading and derivatives with 2x leverage for Bitcoin. To open a trade on eToro, just change the toggle from “BUY” to “SELL”. The position will open as short after you switch to “sell” and open your trade. As the price of the asset decreases, it will increase in value.

Short Bitcoin as Derivatives (CFDs) on Bitcoin Broker Platforms

A CFD is a wager between you and a platform, which makes it possible to speculate on a shift in the currency’s price. You would open an account with a contract for difference broker and go long if you felt the price of Bitcoin would increase.

There are quite a few unregulated CFD brokers with leverage of 100x or more, such as BitMEX, Bybit, and Primebit. Often, only BTC deposits are allowed, but sometimes fiat deposits are accepted too (Bitfinex, Binance). Typically, CFD platforms are used by day traders to long or short Bitcoin. Either BTC or USDT / USD is used as pledge for the margin trade depending on the platform and the trader’s type of equity.

Crypto Brokers to Short Bitcoin Derivatives

In this section, we discuss the most popular shorting platforms. We will talk about the kinds of deposits accepted, how much leverage is offered, and the fees. We will also provide all the signup details you need.

Bybit.com

leveraged Bitcoin short trades on Bybit

What kinds of deposit are accepted?

Bybit accepts deposits in BTC, ETH, EOS, XRP, and USDT.

How much leverage is offered?

Up to 100x leverage.

What are the fees?

Each order incurs a two-way fee, one to open the position and one to close it. The taker fee is 0.075%. Actual trading fees depend on execution price and the nature of the order.

How quickly can you start shorting after signup?

Bybit does not have any KYC requirements. An email address or phone number will suffice. After activating your account via e-mail or SMS, you can get started right away.

Primebit.com

leveraged Bitcoin short trades on Primebit

What kinds of deposit are accepted?

The broker accepts Bitcoin deposits only.

How much leverage is offered?

Up to 200x leverage.

What are the fees?

The fee is from shorts to longs or vice versa depending on market conditions. The maximum possible is 0.1875%.
How quickly can you start shorting after signup?

Users can register whenever they want and start shorting at once as long as they have Bitcoin. The broker does not have a KYC policy.

PrimeXBT.com

PrimeXBT Bitcoin margin trading broker

What kinds of deposit are accepted?

Only deposits and withdrawals in Bitcoin.

How much leverage is offered?

1:100 leverage.

What are the fees?

The fees are 0.01% for indices and commodities and 0.05% for cryptocurrency trades.

How quickly can you start shorting after signup?

Go to the registration page and enter a valid email address and password. You can also provide your phone number if you want. After agreeing to the broker’s Terms and Conditions and register, a PIN code will be emailed to you. You confirm your registration by entering this code.

Then, you need to make a deposit. This will take around 45 minutes as deposits require three block confirmations. You transfer funds to your account from your wallet. There is a green “fund” button on the Account Summary page. This transfer is free and instant.

Now, you can proceed to place an order. You choose the pair you want to trade in the platform’s Trade section. You also select the order size. Then, you place a short order by clicking the red button. The Orders widget will display your active orders.

BitMEX.com

leveraged Bitcoin short trades on BitMEX

What kinds of deposit are accepted?

Only Bitcoin. You can deposit any amount you wish. You make a deposit by copying and pasting your address using your Bitcoin wallet software.

How much leverage is offered?

Up to 100x leverage.

What are the fees?

The fee is -0.0100% on perpetual contracts. On traditional futures, there is a -0.0250% maker fee, a 0.0750% taker fee, and a 0.0500% settlement fee. What’s the difference? You pay a taker fee when you remove liquidity from the order book. This is done by placing any executed order against a book order. You would pay a maker fee when you add liquidity to the book by entering a limit order above the ticker sell price and below the ticker buy price.

The maker fee is charged if you added liquidity and the market moves into your limit order as a result. This is where you place a limit sell above the current market price or a limit buy below it.

The taker fee applies when liquidity is taken away from the order book if you buy or sell using a market order. You will pay the taker fee if 1 BTC costs $18,000 on the market and you market buy at this price because you’ve taken coins (liquidity) away from the order book. Hidden orders always incur the taker fee. However, if the hidden order matches your limit order, the maker fee is paid.

How quickly can you start shorting after signup?

Your deposit is credited to your account after one confirmation on the Bitcoin network, which takes about 10 minutes. You will see a notification on your trading dashboard and get an email. Then, you can start shorting.

Bitfinex.com

Bitfinex cryptocurrency broker with low leverage margin short possibility

What kinds of deposit are accepted?

You can make a deposit in USD, EUR, JPY, and GBP.

How much leverage is offered?

Up to 3.3x. x leverage.

What are the fees?

Like virtually every broker, Bitfinex charges maker or taker fees. These range from 0% to 0.2%.

How quickly can you start shorting after signup?

Generally, it takes one to two business days. You don’t need more than a valid email address to use the exchange. A deeper KYC process is required for more advanced levels.

BitSeven.com

leveraged Bitcoin short trades on BitSeven

What kinds of deposit are accepted?

Only in Bitcoin.

How much leverage is offered?

100x.

What are the fees?

-0.075%.

How quickly can you start shorting after signup?

No ID verification is required and signup is easy and simple. You can start immediately.

FTX.com

No.1 altcoin shorting platform

What kinds of deposit are accepted?

The exchange accepts deposits in TUSD, USDC, Bitcoin Cash, Litecoin, Tether PAX, Bitcoin, and Ethereum.

How much leverage is offered?

Up to 101 x leverage.

What are the fees?

The fees are 0.04% to 0.07% depending on traded volume. No fees are charged on futures settlement.

How quickly can you start shorting after signup?

You can start shorting as soon as you’ve registered, which is quick as no ID verification is required unless you want to withdraw more than $1,000 or equivalent in another currency per day. The longest anyone has waited is two business days.

Short Bitcoin Futures

Bitcoin Futures are the most popular mainstream cryptocurrency futures today. Here we’re referring to traditional Futures with fixed settlement date, not the perpetual contract variant that can be traded with the brokers mentioned above.

Cash-settled futures are listed on the Chicago Board Options Exchange (CBOE) and the Chicago Mercantile Exchange (CME). “Cash-settled” means actual BTC does not back these futures. The value is paid out to you in cash when the futures contracts expire.

Simply put, short Bitcoin futures are tantamount to an agreement to take or make a delivery of the crypto at a fixed future date. There is a specific amount of the traded product in each futures contract. For example, each contract on CBOE contains one BTC. It is settled depending on Bitcoin’s Gemini cryptocurrency exchange auction price.

The trader can buy or sell these futures contracts at any time during the contract term because supply and demand define the price of BTC and of the contract itself.

Deribit.com

Deribit BTC Futures short trading opportunity

What kinds of deposit are accepted?

Bitcoin only.

How much leverage is offered?

Up to 100x.

What are the fees?

The maker fee is 0%, taker is 0.05%.

How quickly can you start shorting after signup?

In a matter of minutes, because of how fast and easy Deribit’s signup process is. You create an account on the broker’s homepage. You’ll be taken through a simple signup verification that involves entering a valid email. However, the platform has two different ID verification levels. On level 0, only basic details are required. Proof of ID is required on level 1.

Binance (Futures/Leveraged Tokens)

Bitcoin shorting on Binance

What kinds of deposit are accepted?

BTC, ETH, XRP, and two fiat currencies: the US dollar and the naira.

How much leverage is offered?

From 1 to 125x.

What are the fees?

The exchange charges a flat fee of 0.1%.

How quickly can you start shorting after signup?

Future users must undergo a stringent procedure that includes uploading an ID card, a passport, a driver’s license, or another ID document. After verifying your data, the exchange sends out email notifications. New users have to complete the basic data and photo verification process within 15 minutes. They are asked not to refresh the browser in this process.

Example of Leveraged Bitcoin Short Trade

The price of BTC toward November 20, 2020 was $18,150.00 for 1 BTC. Let’s say you short sell 5 Bitcoins. This means you borrow 5 Bitcoins and sell them for $90,750. Then, the price of Bitcoin drops to $15,000 for 1 BTC. You repurchase these 5 Bitcoins to return to the entity you borrowed from. This costs you $75,000. Your total profit would be $90,750 – $75,000 = $15,750.

FAQ

How risky is shorting?

As there is no limit to the price of BTC, the potential loss is infinite. Usually, brokers close positions or do margin calls when a trader’s stake is getting too limited. You can lose your trading capital on the platform, but nothing more.

What is the difference between isolated and cross margin?

Cross margin avoids liquidation by using all the funds available in one’s balance. On a losing position, any realized profit and loss from other positions can assist in adding margin. Open positions share the margin. Cross margin is useful for arbitragers who don’t want to be exposed on one trade side upon liquidation and for people who are hedging existing positions.

Isolated margin is where the margin assigned to a position is limited to a set sum. The position is liquidated if it drops below the maintenance margin level. This type of margin is preferred for speculative positions. One can limit their losses to the initial margin set by isolating the margin used by the position. This facilitates short-term speculative trades that didn’t develop as planned.

Can you short cryptocurrency?

Yes, one of the easiest ways to do so is via a crypto margin exchange. Margin trades allow traders and investors to make a trade by “borrowing” money from the exchange.

How do I short Bitcoin successfully?

You obtain a short-time loan through the reserves of the exchange and sell their Bitcoin when the price is high, like it is at present (end 2020). When (if) the price drops, you buy it back. You keep the difference (your profit) after deducting broker fees and pay the original loan amount back.

Where can you short Bitcoin?

A cryptocurrency margin trading platform offers the best opportunities to short BTC. A lot of brokers and exchanges enable this type of trading.

How to short Bitcoin on Kraken?

Users can either deposit BTC and short it directly with or without leverage or deposit fiat money and short Bitcoin by “borrowing” the BTC they want to sell. More specifically, you choose “Sell Order”, then “Limit Order”, the “2x” leverage. This is required to go short. Let’s say the price is $153.67 at this time. Then, you choose the number of shares. Let’s take three as an example. To make sure the order is filled, set the selling price a bit bellow, for example at $153.65. Review and confirm your order.

How much is it to short Bitcoin?

This depends on the current value and the broker or exchange fee. Most investors who short Bitcoin are skeptical of the currency’s popularity, believing that its price will drop. Shorting Bitcoin might prove costly as optimism around its future use is growing.

How to short Bitcoin with CFD?

Instead of borrowing BTC, selling it, and then buying it back at a lower price, you agree to settle on the price difference. You get paid the difference if price drops without the hassle of selling and buying it back. Well-known regulated CFD brokers with USD settlement are Plus500 or Thinkmarkets. But there are also cryptocurrency brokers where you can short Bitcoin derivatives in leveraged trades based on BTC deposits. The leverage will be borrowed bitcoins from other users or from the broker.

Where to short Bitcoin Cash and Ethereum and other altcoins?

You can do this on the exchanges we’ve reviewed here. Of course, there are probably many others that offer a user experience that is just as pleasant, if not more. Remember – never wager more than you can afford to lose.

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