Why Crypto Traders Might Need to Embrace Shorting Bitcoin (BTC) and Other Cryptocurrencies
Sunday the 25th of November will go down in history as the date Bitcoin (BTC) fell to $3,500 and Ethereum (ETH) went sub $100 when it was valued at $98 only hours ago. These major coins are now valued at $3,866 and $111 as we look forward to the final week of November. In the case of XRP, the digital asset has held its own at the number 2 spot after edging out Ethereum a few days back. XRP is currently valued at $0.35 and could be one of the biggest bargains of the recent crypto market crash if this turns out to be the end of the bear market.
The Fall of Both BTC and ETH Cannot Be Ignored
Going back in time to the first days of September 2018, Bitcoin (BTC) was comfortable at levels above $7,200. The King of Crypto has fallen by around 50% when we compare with today’s lows of around $3,500.
In the same time period, Ethereum (ETH) fell from $300 levels to the recent low of $98. This is a drop of 67% in less than 3 months.
Shorting on Bitmex, Bitfinex and Deribit Might Just Have to Be Learnt
Many crypto traders choose to either buy/hold or trade with the hopes that the market value of their favorite digital assets will go up. However, this year – since February – has proven that there has never been a better time than now to learn how to trade against the market (shorting) on the platforms of Bitmex, Deribit and Bitfinex.
But What is Shorting
Short selling is defined as the sale of a digital asset that the seller has borrowed. In simple terms, the trader borrows a certain amount and sells to open the position expecting to buy back later at a lower price. If the trade is successful, he or she pays back the borrowed funds and keeps the difference.
Use of Leverage on Bitmex, Bitfinex and Deribit
The aforementioned platforms also offer what is known as leverage trading where the trader borrows several times the value of the trade. Bitmex offers 100x leverage; Bitfinex offers 3.3x leverage; and Derbit also offers 100 times leverage. This means that on a $10 trade, you can borrow up to $1,000. Your account must however hold a percentage of this amount in its balance that is used as collateral should the trade go south.
What About the Risks of Being Liquidated?
As Darwin once postulated, survival of the fittest might not be a theory relevant to only the jungles and wildlife. Survival of the fittest is also relevant in the crypto markets. Traders who have the confidence and skills to trade using such options offered on Bitmex, Deribit and Bitfinex, are best suited to take the risks of trading on the platforms. Luckily, there is also the option of learning how to short by using the Testnet version of Bitmex.
With Bitcoin losing half its value since September and Ethereum losing 67% of its value in the same time period, traders might need to rethink their usual trading strategies that are hinged on the market continually moving up. The bear market has taught us that there are other options of making profitable trades as the market goes down. However, such trading has its risks of liquidation and only those who are confident should attempt trading on these platforms.
What are your thoughts on traders learning to embrace platforms such as Bitmex, Bitfinex and Deribit to short Bitcoin and other prominent cryptocurrencies? Please let us know in the comment section below.
[Image courtesy of MoneyObserver.com]
Disclaimer: This article is not meant to give financial advice. Any additional opinion herein is purely the author’s and does not represent the opinion of Ethereum World News or any of its other writers. Please carry out your own research before investing in any of the numerous cryptocurrencies available. Thank you.