What is Meant by Short Crypto and How Can We Short Crypto Coins?
Can we generate profit when the crypto market is low? Yes, we can generate a good amount of profit when the value of crypto coins is low. Sounds awkward, right. But shorting crypto is a technique to earn profit even when the market is in crisis. When you predict the value of crypto is falling, then make a mind to buy a coin. Borrow desirable crypto coins at the current price. Sell them on exchange. Wait for the price of particular crypto to decrease. When the market goes down, repurchase coins. In this way, you will earn a good profit through the difference between the selling price and buying price- sounds interesting right. Let's explore how to short crypto?
How to Short Crypto?
As the trend of cryptocurrency increases, methods of shoring crypto are also extending.
Margin trading is considered the easiest way for shorting crypto. We have to borrow coins from a broker for trading in this type. It involves borrowing money. There is no guarantee of profit. The probability of profit and loss is 50% in this case.
Brokers define a threshold of coins you can broker. Through a mutual collaboration of investor and broker, a date is selected. The investor is supposed to return the money with a decided date. In case of extension, broker can apply interest, leading to loss.
Future trade contracts come with security. If you invest in a futures contract, it means you are sure that the security of coins will increase in the future. Whereas if you sell a contract, it symbolizes a decrease in security.
Binary Operation Trade
Binary operation trade is a very straightforward technique. Profit in such trading is maximum or zero. It's like yes or no. There is no middle way between. A binary statement is made. Investors are supposed to agree with binary statements or disagree.
If investors agreed upon a binary statement and assumptions came true, then maximum profit. On the other hand, zero profit if assumptions fail and vice versa.
People buy contracts based on future predictions. Predictions are the instincts of market participants. Pay is based on the success of future predictions. The flow of the market will decide what investors will get.
For prediction, there is a need to read market trends. If you completely trust the prediction, go with the flow.
Factors to Consider While Shorting Crypto
Volatility of Coin
If you are investing in coins whose prices have been fixed since the day it launched, it is useless to short that crypto. We need to shortcut cryptos whose value and price fluctuate with time.
If you invested a coin as an asset, putting it in a shorting position is risky. It is good when you just want to play with coins and earn profit. Don't short coins, which are your asset. There is a risk of asset loss.
Hence, for people who want to take full advantage of crypto coins even in down markets, short crypto is best for them. But it is necessary to know about dealing with crypts. You need to prepare for every situation due to high flexibility in the crypto industry. After knowing about how to short crypto, start your trading as well.