How to short Bitcoin, january 2021
The time has come for Bitcoin to rally again. Numerous nocoiners have been watching Bitcoin from the sidelines, thinking that Bitcoin is a fad. After they realize that they have been missing the train upwards, they start wondering if there would be ways to gain their favourite fiat currency by betting against Bitcoin, waiting for the next wave of Bitcoin deaths.
No worries! Financial technology has been progressing a lot and there are numerous ways to bet again rising Bitcoin prices.
Short selling is borrowing a security, selling the borrowed securities instantly and then buying it back again after some time. That allows the borrower to benefit from raking the profit from a price drop. However, in this article I cover generally any instruments that allows you to bet for falling Bitcoin prices such as futures and options.
Disclaimer: personally I don’t recommend betting against Bitcoin. In fact, I think you will very likely lose a lot of purchasing power with that strategy. Additionally, I don’t have any connections to any of the platforms/services/products mentioned here, if you plan to do business with them it is entirely on your own risk. I personally haven’t used any of these since I’m long-term holder of BTC and generally don’t do active trading.
Ways to short if you don’t want to touch Bitcoin-based platforms
Many people prefer not to set up any new accounts, therefore they want some instrument which they can trade with their existing brokerage account. There are some alternatives here.
Bitcoin trackers: these trade on some European markets. However, for shorting there seems to be only one product available. It is called 21Shares Short Bitcoin ETP with ISIN CH0514065058. It has quite hefty entry/exit and running fees, around 2%. This product looks expensive and there aren’t much details how it works under the hood.
CME Bitcoin futures/options: CME is US-based company, meaning these products can be traded on US-operated markets such as Interactive Brokers. If you are betting against Bitcoin price, you can take position in futures. Alternatively you can sell call option, or buy put options. The first strategy is riskier than latter.
Betting against public companies that own Bitcoin: bitcointreasuries.org has a list of companies and organisations that hold BTC in their balance sheet. You can sell futures for these, or similarly call options. Most notable Microstrategy (MSTR) has almost 3 billion USD worth of Bitcoin in their balance sheet and they have issued bonds, meaning they have lent money to buy Bitcoin. This means, if Bitcoin crashes a lot MSTR might crash even harder.
Ways to Short BTC if You Are Comfortable Moving Bitcoins
If you have a Bitcoin wallet and are comfortable moving Bitcoins around, then there are lots of alternatives. There are lots of platforms that settle the futures and options in BTC. You just have first to exchange some fiat to BTC, and when you have done the profits you have to exchange the profits back to fiat.
Some of these services are: Deribit, BitMex, Kraken, FTX, Bitfinex, Binance and so on. There are at least tens of these and many traditional Cryptocurrency platforms offer also futures/options or other ways to benefit from falling prices. However if you are already comfortable with using Bitcoins you probably know about these already.
Have fun trading!
