Having more than one bitcoin wallet
Having more than one cryptocurrency wallet is something that any smart investor or trader should…
Bitcoin, and other cryptocurrencies in general, are known for their high volatility. As most crypto enthusiasts know, this means that the price varies greatly. This means that it is risky to invest in cryptocurrency, because you basically do not know what will happen the next morning.
As a direct result of this, many people are trying to develop strategies that allow them to invest in cryptocurrencies without necessarily losing everything if the graph points downwards over a longer period of time. One of these strategies is to short cryptocurrency.
In this article, we will take a closer look at shorting cryptocurrencies, because what do you really do when you short cryptocurrency, how do you do it and is there anything specific you should keep in mind when you do it? We will use the cryptocurrency bitcoin as an example.
First of all, we have to answer the following questions: What does it mean to short bitcoin? This is a term we immediately recognize from the English language, so this is a loanword from English that has been incorporated into english as a natural expression.
In English, “short” is an adjective. It describes a person or thing to express that he or she is “short” or small in stature, so this word can be used in different settings. In connection with cryptocurrency, you see that the word is used as a verb, which refers to something you do.
To understand a concept, it is important to put it in the right context, and we have now done so. Shorting bitcoin is therefore something you do, and it simply means that there is speculation as to whether the value of bitcoin will fall. And based on the volatility of the cryptocurrency, it is far from unnatural.
But what exactly is the purpose of shorting bitcoin? It is that the investor should be left with some form of profit despite the fact that the value of the cryptocurrency falls, because you will not do that if you do not short.
You can short bitcoin in different ways. How this works is basically based on how you have proceeded to invest in cryptocurrency. Bitcoin can be shorted as follows:
In connection with shorting bitcoin, no matter how you obtained it, you must open a bitcoin short position to be able to short bitcoin. And the more the value of bitcoin falls, the more the value of your bitcoin short position will increase.
In practice, shorting bitcoin is based on an agreement each individual investor makes with a brokerage house. The investor borrows bitcoin to be sold at market price, and then you fight bitcoin back to give it back to the broker afterwards. The profit (which you keep) is the difference between the sale and the purchase price.
Shorting bitcoin is a relatively straightforward process once you have familiarized yourself with how to do it. Below you will find a step-by-step guide that shows you how to shorten bitcoin.
As we mentioned later, you need to deposit money into your account. Brits probably deposit english kroner in their account. However, the platform may not support it, but you do not have to worry about it. Your currency is automatically exchanged for a currency that the platform accepts!
In this article, we have used bitcoin as an example, and then there may be some who wonder how far it is possible to short other types of cryptocurrency. Or is it only bitcoin that can be shorted?
But of course it is not just bitcoin that can be shorted. You can also short cryptocurrencies such as ethereum , and that process is as simple as shorting bitcoin because the processes are exactly the same. Only the cryptocurrency varies in this case.
How to short bitcoin and other options :
As most people know, investing in cryptocurrency is associated with a risk due to the high volatility. But is shorting bitcoin (or another cryptocurrency) an equally big risk?
The answer to this question is simply yes! It is important to remember that high volatility does not necessarily mean a fall in prices – it can also mean a price increase, and then you will lose a good deal of money by wondering whether the price will fall.
You may therefore want to think carefully through the case before jumping into it. Because maybe it will not be most advantageous to short bitcoin? Although we have used bitcoin as an example here, you must remember that there are many other cryptocurrencies to choose from!