The bear market has sent cryptocurrency prices plunging over the past two weeks. Bitcoin has sunk to its lowest level since the early days of 2017, dropping as low as $3,600. With other cryptocurrency prices sinking to similar lows, it’s time to face the reality: crypto traders need to embrace the art of shorting.
On Sunday, the price of bitcoin fell to $3,500 and ETH dropped below $100. On Monday, prices have rebounded slightly, with bitcoin sitting in the $3,700 range.
XRP, meanwhile, is one of the few major cryptocurrencies that hasn’t plummeted in value: XRP is holding steady with a price of around $0.35. Unlike other cryptocurrencies, XRP hasn’t dropped to its early-2017-level prices.
Based on these new lows, however, analysts are suggesting that traders face the facts: it’s time to learn how to short bitcoin and other cryptocurrencies.
John at Ethereum World News just wrote an article explaining the value of shorting bitcoin in the midst of a bear market:
“Shorting on Bitmex, Bitfinex and Deribit might just have to be learnt,” writes Njui.
“…this year – since February – has proven that there has never been a better time than now to learn how to trade against the market (shorting) on the platforms of Bitmex, Deribit and Bitfinex.”
Bitmex, Deribit, and Bitfinex are three of the biggest platforms for bitcoin futures contracts. They’re also infamous for allowing traders to take leveraged positions. Bitmex, which doesn’t even require KYC verification, allows 100x leverage, as does Deribit.
Short selling, for those out of the loop, involves taking a position that an asset will decrease in price. If you believe the price of bitcoin will fall below $3,000, then you can short bitcoin to make money when that prediction is correct.
With a $10 trade on Bitmex or Deribit, you can borrow up to $1,000 to trade bitcoin (although your account must hold a certain amount as leverage to make this trade). As the price of bitcoin drops, you buy in at a lower level and make money from shorting.
When done correctly, shorting can make you a very wealthy person. Of course, even in 2017’s bear market, shorting hasn’t been easy: bitcoin has gone through rises and falls, periodically rising close to $10,000 before plummeting again. It’s easy for a short position to get wiped away even when the price of bitcoin has gradually fallen throughout the year.
Shorting is considered an advanced trading strategy. However, it’s relatively straightforward to learn. Not all cryptocurrency exchanges allow it.
Short sellers, however, might be the smartest crypto traders in 2018. With crypto prices sinking since January, anyone who took a short position on crypto in January at the height of the market is laughing to the bank today.
It’s not too late to learn how to short sell. But let’s be honest: the moment you take a short position on bitcoin, that’s when we’re going to hit the bottom and the bull market is going to kick in – and you don’t want to be a short seller in a bull market.