The price of bitcoin recently took a bit of a sharp dive down. As I'm writing this post, I have noticed the price recover a little, but it's still nowhere near its peaks.
So has the bull run ended? Well I have no idea. What I do know is that when the price of Bitcoin falls, it falls in a dramatic fashion. And this volatility means there are profit opportunities for shorting bitcoin.
What is Shorting
Shorting or short selling is where you take a position that will profit when the price of an asset drops. In this case bitcoin. Now to be able to profit when the price drops, you can't actually trade the asset. Instead you need to trade a CFD. CFDs allow you to profit from either price direction.
Selling Bitcoin on eToro
eToro allows you to buy and sell bitcoin CFDs. In this scenario, where you profit from the falling price, you'll want to “sell” bitcoin. When you hold this “short” position, whenever the price drops, your profits will go up. Bitcoin can be traded using leverage as well on etoro, although, do to the volatile nature of Bitcoin, I think this is a highly risky strategy.
Why Short Bitcoin?
This comes down to whether or not you you are a bitcoin bear as opposed to a bull. There are lots of people hyping up Bitcoin, and many people believe they are artificially inflating the price. At the end of the day, you'll need to make a call based on your own research. No one, including myself can predict the price of Bitcoin.
Top Traders will profit no matter what direction bitcoin goes
The very best traders should be able to profit from bitcoin, no matter what direction bitcoin is going. When the price is falling they'll open short/sell positions and will go long when it's rising. This is sort of like swing trading where you look at the charts to find a pattern and then trade within that pattern range. This is something that takes a lot of practice, so use a practice account to begin with..
Bitcoin Bears can profit to
So if you're a bitcoin bear and don't believe the hype around bitcoin, the good news is, that through CFDs, you're still able to make a profit and join in the fun of Bitcoin.
Where do you think the price of bitcoin will be in the future? Let me know in the comments.