How to Short Crypto and Make Money During Bear Markets
It is a known fact by now that Crypto investors always stay at a maximum level of risk. With a global economic recession coming our way, investing in Cryptocurrency is riskier than ever. Yes, shorting Crypto is a potential solution, but in some cases, it can also prove disadvantageous. That’s why complete knowledge of the matter at hand is necessary.
We’re not stating that only a master of Crypto shorting can survive and make money in a Crypto bear market. Shorting Crypto is only a potential pathway to tackle the Crypto bear market. Several other options are available, but a chance to short Cryptocurrencies sounds the most appealing. Before diving deep into the topic, let’s look at what shorting Crypto means.
What is Crypto Shorting and How Can You Do It?
Be correct, as Crypto shorting is nothing like shorting a stock. While shorting a stock, you simply sell a borrowed asset while the price declines and purchase it back at its lowest price to keep the profits. While this is also an option in the Crypto world, Crypto shorting is done differently. Several methods include buying options, margin trading or using a contract for difference.
Crypto shorting has been quickly gaining heat as it’s the most popular among people willing to make money during bear markets. It multiplies the risks of winning and losing big time. People have sometimes used Crypto shorting to tackle the Crypto bear market and earn significant money. Here are different types of Crypto shorting techniques.
1. Margin Trading
In lame man’s language, margin trading means playing the game of Crypto by borrowing money from an investor. In most cases, the mentioned investor is either a brokerage or an exchange. Margin trading doubles the risk of gains and losses at the same time. The exchange will take a minor fee for using their funds plus the interest over profits, so it’s a win-win for everyone. But there’s something more you would like to know.
The liquidation price is critical to keep in mind before diving into margin trading. Liquidation price is a threshold at which the exchange will automatically close a position. It is done to ensure that the exchange doesn’t lose any money, but only the traders take the hit. So, if you fail in margin trading, you’ll be responsible for bearing the losses, and your exchange or brokerage won’t be affected. The best way towards margin trading is to use Bybit, which offers 3x leverage and multiple earning opportunities.
2. Using Contract for Differences (CFD)
Contact For Differences (CFD) is a contract between you and the provider or broker. There are several different CFD providers available on the internet. Contract For Differences is a way to basically “bet” on the price movement of a product; you can trade CFDs or stocks, commodities, indices, forex and more. You don’t own or sell the underlying product in any way. You simply change the price movement of that product, which is why CFDs are known as derivatives.
Trading CFDs is risky because CFD brokers usually give leverage to traders; however, CFDs allow for easy, liquid and low-cost trade of many products that would otherwise be quite difficult to trade on. CFDs are traded in units, which sometimes correspond to the underlying price, but not always. Therefore, CFDs are a helpful Crypto shorting technique to make money during a bear market.
Cryptocurrency futures is a contract between two investors regarding the price of a Cryptocurrency. Futures play a vital role in boosting traders’ confidence when the market isn’t stable compared to its standard. Futures have a clean structure, so it’s comparatively easier to understand.
Futures also hold importance for beginners as it’s a great way of making a quick buck while studying the market and testing your analytics simultaneously. Moreover, buying futures is an efficient way to tackle the Cryptocurrency bear market.
4. Dollar Cost Averaging (DCA)
In simple language, dollar cost averaging (DCA) means buying a specified amount of Crypto over a short period. This approach is also known as “buying the dip.” This technique is mainly used when the Cryptocurrency market “dips”in price. If you have a good grip on the concept of DCA, then the time of the bear market will be ideal for you.
The DCA approach might sound silly initially, but making money during the Cryptocurrency bear market is beneficial. The DCA approach means you’re not single-dumping your investment but investing in chunks over time. Doing so will ensure that your position remains strong, and you can also side-step the adverse effects of short-term volatility.
Crypto Exchanges and Crypto Shorting
With the constant growth in Crypto audiences, Crypto trading techniques are evolving faster than ever. More and more people, including bloggers, YouTubers, influencers, and gamers, are interested in the field. For that reason, their audience is also directed towards Crypto trading.
Crypto shorting is complex; that’s why some techniques are banned across different regions of the globe. Therefore, choosing a Crypto exchange that is not only user-friendly but also takes care of your Crypto shorting needs is necessary. Bybit is an excellent choice in this regard.
Bybit and Crypto Shorting | A Perfect Combination
Launched in 2018, Bybit has maintained a reputation as an A-tier Crypto exchange for over four years. It has over 10 million users worldwide and is available in over 160 countries. Bybit is one of the few Crypto exchanges with a clean Crypto shorting structure. It allows traders to short-sell Bitcoin and other Cryptocurrencies easily via its unmatched Futures marketplace.
Bybit is on its way to being the world’s first Crypto ark. It has a nearly 100% functionality rate. Bybit features an ultra-fast trade matching engine. It means that Bybit can operate at a whopping speed of 100K TPS. It has an ultramodern pricing system which is crucial for Crypto shorting. With all these unparalleled benefits, Bybit doesn’t have any hidden charges; that’s why it’s a perfect choice if you want to short Cryptocurrencies.
Crypto shorting can be termed a savior of the Crypto world as it allows users to make money in a Cryptocurrency bear market and keeps it interesting even when the market is crashing. There are several different methods to short Cryptocurrencies. The top four plans have been discussed in detail showing you how to short Cryptocurrencies and make money during bear markets.
Crypto exchanges play a crucial role if you’re getting into Crypto shorting. With unmatched features and 0% downtime, Bybit is an excellent Crypto exchange option, perfect for shorting Cryptocurrencies. We hope you found all the information in our article relevant and valuable. Happy Trading!