Cryptocurrency bears are dreaded across the market due to the massive losses that investors can make within a very short time. However, as some users count their losses during price dips, some are counting profits.
Bitcoin makes for one of the best cryptocurrencies for short selling. Its volatile price movements give agile users a chance to profit during positive and negative price swings. Read on for more details if you want to learn how to short Bitcoin during a bear market.
Going long or going short on a currency (such as BTC/USD) is a form of derivative trading. Going Long is the same as placing a BUY trade. When you go long on a position, it means you are owning it and benefiting from the upside of that currency pair until you close the position. When you go short, you are speculating that this currency pair is going to decrease in value and therefore you will profit when the price falls. Below is a more detailed explanation with some illustrations.
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Let’s say the Bitcoin (BTC/USD) price is currently $50,000 USD and you believe the price could reach $55,000 USD in the next 24 hours pending some announcements. You Go Long or place a buy trade on 1 BTC with 100X leverage.
The initial capital you would require opening such a position would be 1/100 of $50,000 = $500 USD.
A few hours later Bitcoin reaches its target price of $55,000 USD and you close your position.
Profit calculation on a Long Position:
Closing price - Opening price x Quantity
= $55,000 - $50,000 x 1
= $5,000 USD Profit
Let’s say the Ethereum (ETH/USD) price is currently $2,000 USD and you believe the price could drop to $1,800 USD in the next 24 hours due to some negative news. You Short or place a sell trade on 25 ETH with 50X leverage.
The initial capital you would require opening such a position would be 1/50 of $50,000 = $1,000 USD.
A few hours later Ethereum reaches its target price of $1,800 USD and you close your position.
Profit calculation on a Short Position:
Opening price - Closing price x Quantity
= $2,000 - $1,800 x 25
= $5,000 USD Profit
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All content produced by BitMart is intended solely for educational purposes. This should not be taken as financial or investment advice. Individuals are advised to perform due diligence before purchasing any crypto as they are subject to high volatility.