During 2017, the price of Bitcoin went up and up. Most people speculated that at some point, there would need to be some type of correction. And that correction happened during early 2018.
It shouldn't be all doom and gloom for bitcoin traders though – the long term outlook is still bullish. And if you play your cards right, you can still profit when the price of Bitcoin falls.
Here's a quick guide on some options for shorting Bitcoin:
Shorting Bitcoin with CFDs
Contracts for Difference, are currently the most popular method for shorting bitcoin. A CFD is a contract between you and your broker to settle the difference in price when the contract expires. While that may sounds complicated, in practice, buying and selling Bitcoin using a CFD is as easy as buying or selling actual Bitcoin (if not much easier).
It was a big deal when bitcoin futures became available. Everyone believed it would have a massive impact on the market. But in reality the volume was quite small. Bitcoin futures are still a small market, but do offer U.S based investors and option to short Bitcoin.
Where to short Bitcoin?
Here are four different options for shorting Bitcoin. Like every platform I recommend, I've personally used all of them:
eToro is the worlds largest copy trading platform with over 5 million members. They've been around for 10 years and are fully regulated. They begun offering Bitcoin trading 2 years ago. In my opinion they offer one of the best trading interfaces.
In terms of fees eToro is fairly competitive. If you open a short bitcoin position on eToro you'll actually earn a daily interest fee! Short positions on eToro are CFDs where as unleveraged long positions are actual crypto trades.
EasyMarkets (previously EasyForex) is one of the worlds largest brokers. They added Cryptocurrency trading in 2017. One of the unique features on their platform is the Trade Insurance. With trade insurance you can pay a small fee upfront to protect your trade against a loss. Basically it gives you 60 minutes to cancel your trade if you don't like how it's turned out. Because Bitcoin is so volatile, this could be a life saver for traders.
Plus500 is a very popular forex trading CFD platform. They've offered support for Bitcoin and a bunch of other cryptocurrencies for some time. The minimum deposit on Plus500 will be around $200 (depending on the payment method you use) so the platform does suits those who aren't looking to make large trades.
All bitcoin positions are leveraged. This means if the price of Bitcoin is volatile (which it is), you'll need a larger balance to support your margin. I don't recommend Plus500 for beginners. Beginners should try copy trading on etoro or use a demo trading account.
If you already own a bit of Bitcoin, and want to make some money off it as the price falls, use WhaleClub. WhaleClub is a CFD trading platform that is powered by digital currencies. Instead of depositing using fiat, whaleclub only accepts Bitcoin or Dash deposits.
Once you've made a bitcoin deposit, you can then open long or short trades in Bitcoin or trade other financial instruments such as Forex or stocks. For talented traders, Whaleclub is a good option to put your Bitcoin to good use.
Disclaimer: eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFDs.
Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
Past performance is not an indication of future results.
Cryptoassets are volatile instruments which can fluctuate widely in a very short timeframe and therefore are not appropriate for all investors. Other than via CFDs, trading cryptoassets is unregulated and therefore is not supervised by any EU regulatory framework.
eToro USA LLC does not offer CFDs and makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication, which has been prepared by our partner utilizing publicly available non-entity specific information about eToro.