Most thought that trader Michael Burry was crazy when he started shorting stocks in 2008. But he felt that the market was overheated and the prices would eventually drop. His intuition was right – and it made him $100 million richer. If you feel that the Bitcoin price will drop, too, then it’s time for you to start shorting crypto.
“Shorting” is one of those financial terms that everyone has heard but few understand. It’s quite simple, actually: to short Bitcoin means to bet against it – that is, to act on the assumption that the BTC price will fall. There are a couple long-standing tools in the market to achieve this, as well as a novel and much safer way, which we’ll describe at the end of this article.
Two older, riskier ways to bet against Bitcoin
Here are the two main tools that traders use to open short positions in BTC:
1) Margin trading, or trading with leverage: the trader puts down a deposit, borrows Bitcoin from a broker, sells it high, waits for the price to fall, then buys it back low and returns the BTC to the lender.
2) Futures contracts: instead of actual Bitcoins, the trader gets the right to buy BTC at a lower price on a certain future date.
It seems quite easy in theory, but the reality can get messy. Shorting is an extremely risky business, and you have to be both great at fundamental analysis and very lucky. Especially with margin trading, if the price suddenly starts growing rapidly, the trader will need to spend a lot of their own money to buy enough BTC to reimburse the lender (broker).
Luckily, there is a new solution on the market that takes most of the risk out of shorting Bitcoin.
Bitcoin Short is a new ERC20 token issued by Decentracapital. Its price is inversely linked to that of Bitcoin: when one falls, the other rises. Thus, if the exchange rate of BTC drops by 10%, BSHORT will gain 10%. Every token is 100% backed by Bitcoin swaps, futures, and options owned by Decentracapital, which will prevent any unexpected price fluctuations: Bitcoin Short will always move in the opposite direction from BTC.
As with any ERC20 token, BSHORT can be traded on decentralized exchanges. This means that shorting Bitcoin on a DEX will finally be possible. Up until now, short positions in BTC were only available on centralized crypto exchanges.
What’s more, since you’re not under any obligation to sell your BSHORT on any specific date, you can hold it for as long as you like – or until the BTC price falls as much as you’d like it to. Meanwhile, you can store your Bitcoin Short tokens in any wallet that supports ERC20 or in Metamask.
Decentracapital aims to ensure that trading spreads remain very low while liquidity keeps growing, which will make Bitcoin Short an attractive asset for active traders. BSHORT is already listed on three exchanges: Bitcratic, ForkDelta, and LedgerDex. Recently, Decentracapital signed an agreement with Livecoin, an exchange from the CoinMarketCap Top 10. In September, the token will begin trading on Coinbene, followed by several more exchanges in late 2019.
If you’d like to know more about Bitcoin Short or buy the token using Metamask, visit decentracapital.com.