In this article, you will learn exactly how to short bitcoin through a step-by-step guide. In this guide, I have chosen to use the exchange KuCoin as an example to show you what the process looks like. However, once you learn how to do it on one platform you can do it on any platform.
Many exchanges and broker trading platforms out there allow shorting but very few traders know where to find them. The best exchanges to short crypto and bitcoin always offer margin-traded products such as derivatives, futures, and swaps.
Have you ever wanted to short-sell bitcoin because the market was too high?
This is a common feeling among traders and when the time comes to go the opposite way after a long bull run, you need a good broker to back you up with the possibility to sell bitcoin. Short-selling bitcoin is a great way to make money with cryptocurrency.
The best thing about shorting BTC is that you can profit from a negative market move and if you are good at it you can even use leverage.
Today you will learn exactly how to play the market sell-offs and potentially earn some money while doing it.
How to Short Bitcoin – Step by Step Guide
Short-selling bitcoin is not more difficult than doing the opposite, buying the coin.
However, many traders struggle to do this due to a lack of knowledge and also the lack of a proper trading platform.
In this article, you will learn exactly how to short-sell bitcoin and you will get to pick an exchange that suits you.
The general rule of thumb is:
To be able to short bitcoin, you need to trade on a platform with futures, swaps, margin, or leverage.
All of the platforms above in the comparison table will feature one or more of these.
For you to start shorting BTC, you need to first create an account, then find where on the platform you need to go.
All of these platforms allow you to buy crypto with a credit card so it’s very easy to get started.
The first thing you want to do is to pick a platform that you like in the comparison table above.
All of the bitcoin trading platforms have some different features so you might want to check out a few before you select a winner.
Some have a more developed trading interface and some have a more simple setup.
It all depends on your level as a BTC short seller and what kind of charting package you prefer.
When you know which platform to use, go ahead and sign up with the exchange.
Now for this step, I will give you an example using the KuCoin trading platform.
After you’ve registered go ahead and click the “Futures” button in the main menu in the top left corner.
You can either choose the Lite or Pro trade interface.
If you are a beginner trader I recommend that you start shorting bitcoin with Lite.
If you have the experience you should try out the Pro interface since it comes with more tools and a full charting package from Tradingview.
Now if you have chosen the Lite trade interface you will see this:
As you can see in the highlighted area in the bottom right corner there is a button that says Short.
What you want to do now is to select your position size above the order selection buttons and then click Short.
That’s how to short-sell bitcoin on KuCoin, pretty straightforward.
In my opinion, KuCoin is the best trading platform for shorting BTC.
What is short selling? Here is an example
The best way to describe short selling is to say that it’s the opposite of buying.
For example, when you sell BTC short, you are betting on a negative price movement.
Let’s take an example that will help you understand.
The price of bitcoin is trading at 10,000$.
You get a feeling that the market has traded too high, looks weak, and you think the price will drop in the coming days.
You want to profit from this potential negative movement in price, so you decide to short-sell bitcoin.
You log on to KuCoin and create an account.
You head over to the Futures section of their trading and place an order in the bitcoin market.
In the next couple of days, the price of BTC fell to 9500$ and you made a profit of 500$ which you get to keep once you close the position.
That is the best example I can give you of how short-selling works.
Don’t make it too complicated when it’s not.
Can Bitcoin be shorted?
Yes, bitcoin can be shorted on many exchanges.
If you are looking to turn a negative BTC market into profits I suggest that you start by selecting a trading platform from the comparison table at the top.
Once you have done that you can get ready to start going short.
You do this on any crypto exchange that offers futures, swaps, options, leverage, or margin trading in bitcoin.
All of the exchanges above have these features so it’s up to you to pick your favorite.
The reason I’ve chosen these platforms is thanks to their top-level standards on security and user interface.
You can start shorting BTC knowing that you are trading on a top-rated exchange with a very good reputation.
What does short Bitcoin mean?
To go short bitcoin means that you bet on a negative price movement.
You place an order in the opposite direction on your broker and if the price of BTC falls, you make a profit.
It is the same as buying BTC but in the opposite direction.
You don’t need to own BTC before you go short.
The broker you are using has a system that lets you trade with USD, EUR, GBP, or any other fiat currency.
So, the meaning of shorting BTC in the simplest form is to say that you bet that the price will fall.
Can I short Bitcoin on Coinbase?
No, you can not short-sell bitcoin on Coinbase. They do offer 3x leverage on their platform but they do not offer too short-sell at all for any cryptocurrency. I think Coinbase has chosen to not let traders do this on their platform due to the risks involved.
It can be very difficult to successfully short-sell cryptocurrencies in general, and the risks to the other side are almost infinite. Since many of their traders are beginners they feel that it’s better not to give this option at the moment. This is only speculation and there might be other reasons as to why shorting BTC is not possible on Coinbase.
And maybe in the future, it will be possible, who knows, but for now, you can’t.
Where can I Short Bitcoin?
Below is a table of some recommended exchanges where you can short-sell bitcoin.
|Exchange||Regulation||Location||Trading Fee||Minimum Deposit|
|BitYard||FinCEN, ACRA, MEAC||Singapore||0.10%||$10|
|CEX.IO||FinCEN, FINTRAC, GFSC||United Kingdom||0.25%||$20|
|StormGain||–||Saint Vincent and Grenadines||0%||$50|
|ByBit||–||Virgin Islands, British||0.075%||$30|
These brokers have been hand-picked by experienced traders that know the ins and out’s of shorting. By using these exchanges you can be assured that security and functionality are at their best. You need a good trading interface with proper order selection to limit your risk and open up the profit potential.
On these platforms, you will be able to use limit orders, market orders, as well as stop-loss orders to protect your downside. They also offer bitcoin leverage trading when you are short selling which can be an extra tool to increase profits. So the next time you ask where can I short bitcoin, your answer is here.
How can I short Bitcoin in USA?
You can short-sell bitcoin from the USA on many different crypto exchanges that offer margin, futures, or swaps trading in BTC. As long as the broker accepts USD as a deposit you are good to go. So if you are from the United States and want to short-sell bitcoin I would recommend that you start by looking at the trading platforms at the top of this article.
Here is a list of exchanges where you can short-sell bitcoin from the USA:
As you can see the only exchange that doesn’t allow bitcoin shorting from the USA is Bitmex. For the rest, you can go ahead and start profiting from the negative price movements in BTC.
How do I make money shorting Bitcoin?
In theory, when you open a short position and the market falls below your opening price, you will profit and make money.
The same goes for making money while shorting bitcoin.
It sounds easy, but when you put it into practice it’s a little bit harder.
To learn how to make money while shorting bitcoin you need a lot of practice and patience.
It’s just like any other skill in life, it has to be learned over time.
What I could say to help you along the way is that to profit from a negative market move you need to have the right timing or a wide stop loss.
In general, most traders fail at making money in a negative market only because they have too tight stop losses or the wrong timing.
With the right timing, you will be able to have a shorter stop loss, but it’s more difficult.
With a wider stop loss, you need to reduce your position size, but the trading part will be easier and less stressful.
Also, think about why you try to bet on a price fall in the first place, it’s usually because the market is behaving negatively.
So, for you to make money while shorting, you first have to be sure that the BTC market is weak.
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How does shorting bitcoin work?
It works by having a trading platform with the right trading structure setup.
In essence, you are borrowing money from the broker and then you sell this lot to someone else in the marketplace.
If the market falls you will make a profit on this borrowed position.
When you close the position you will get to keep all the extra profits, minus commission fees, and the broker will ask for the borrowed money back.
This is why the trading platform that allows shorting of bitcoin always has some kind of margin, swap, future, or options function where there is borrowed money involved.
You will not see a platform offering this without margin.
So, shorting bitcoin works the same way as when you buy, except that you exchange your current money for a position that you sell to someone else.
This happens in an instant and you don’t have to worry about exactly how the technical aspects work.
In theory, it’s not that difficult but most traders get confused with this concept because it seems upside down.
This is understandable but just think of it as a negative bet in the market that your crypto broker lends to you.
When to short sell bitcoin
This is a tricky question and I will try to explain this in detail from my point of view.
I’ve traded the crypto market for many years and I go long just as much as I go short.
The same goes for my bitcoin trading.
In my early days, I always tried to short-sell the tops of the market, with very little success.
The reason why new traders want to do this is that they feel that the risk to the nearest high is so low.
What is happening is that the market is actually in a positive trend and most traders get caught with their pants down when the market keeps going up.
So most short-sellers get stopped out.
The best time to short-sell bitcoin is when the market is weak
This makes sense if you understand how markets work.
They have inertia and when a market is really weak, it tends to stay this way for a long period.
So if you can gauge when the market is weak and then try to open your negative positions, you will have a much higher success rate.
Moving Averages indicators are a great tool to help new traders understand when the market is weak or strong.
The simple lines plotted on the chart help you see the direction in the market.
Direction can be hard to spot if you are looking at a bar chart or candlestick chart because everything looks so choppy and messy.
Moving Averages will smooth things out to a simple line with a slope.
Depending on your time frame as a trader you can choose which MA to use to see different trends.
But when you finally learn how to stop weakness in the market you are going to find better success with when to short-sell bitcoin.
Try this out and keep the thought of weakness and strength in the back of your head as you are analyzing the market.
The best tip I can give you when it comes to short-selling bitcoin is that in the beginning, you should use less leverage or margin and a wider stop loss.
This bummed me for years when I started because I wanted to make these juice profits of 2000$ per trade.
I traded with big position size and a very tight stop loss but I got stopped out on 95% of my trades.
The trades I got to keep for a while were closed out prematurely because I was not used to seeing such huge profits.
The key to trading success, in general, is to win over time, not to win big all the time.
When I realized this and I looked at my trading and shorting I started to move towards a wider stop loss and a smaller position size.
This made everything much easier and I was making a lot more money than I did before.
I reduced my position size 10 times and this let me have a stop loss of between 5-10%.
Before I used to have a very narrow stop loss of around 0.25% to be able to short bitcoin as heavy as possible.
With my new trading style, I managed to score more wins.
Although they were smaller, they started to add up and at the end of the month, I was net plus on my shorting.
So, the best general tip I can give about BTC shorting is first of all to reduce your size and your leverage.
Secondly, widen your stop loss.
This will make life easier and hopefully, you will start to see better progress with a lot of practice.
What are the risks?
There are two major risks to this kind of trading.
- Tight stop losses
- No stop losses
Usually, when you trade cryptocurrency with leverage the position sizes grow significantly.
It’s only normal to try and utilize all the extra buying power that comes with this feature.
But beware, this buying power seems interesting at first when you start, only to bite you in the butt if you are not careful.
This is especially true when shorting BTC.
A bigger position size always comes with a smaller and more narrow stop-loss which minimizes your risk profile in the market.
Your wiggle room, so to say, gets smaller and you can’t handle many pullbacks in the market.
Since the market acts very choppy regularly your position will get hurt badly from these movements if you have a very tight stop loss.
This doesn’t seem like a problem in the beginning but after a couple of weeks trading like this, you are bleeding to death from a thousand paper cuts.
The next big risk with shorting bitcoin is if you are not using much leverage but you skip the stop loss.
The upside risk to a short position is infinite, which means that you could end up losing your account if the market were to go against you for a long time.
Some traders feel that they don’t need to use a stop loss for protection and this can be deadly when you are shorting.
You need sufficient experience to skip out on your stop-loss completely, so I recommend all new traders use it for every trade.
Those are the two main risks, tight stop losses, or no stop loss at all with infinite risks.
My own experience
In my experience, I’ve had very good success over the years.
I short-sell just as much as I buy the market which opens up a lot of new opportunities in the market.
To be a complete trade you need to be able to take advantage of the negative movements.
But don’t go all crazy on short-selling.
Before I learned how to do it well I traded everything on the downside, but that I mean every setup.
This ended up in tragedy because, in the end, I could not keep all these setups in my head so I wasn’t really in tune with the market.
What has worked best for me is to focus on 2-3 really good short setups.
Here are some of my best setups:
- Big drops after a few days of weakness
- Large capitulation at the end of a negative move
- Big positions in a small slow declining market
After a few days of weakness, there is usually a bigger drop when bulls and buyers from before give up.
This is usually near a support line, so watch out for that.
Large capitulation happens at the end of a negative move where the last bulls close out their losses and the most excited short-sellers push the market.
This move can go on for a few days and create large numbers.
A big position in a small market is used when the volatility is relatively low and the market has been showing weakness for a while.
When the market is smaller with lower volatility I can usually increase my position size and tighten my stop loss a little bit.
As soon as the position is in the green I move my stop loss to positive.
These are my own trading experiences and setups for short-selling bitcoin.
In this article, you have learned some great tips for short-selling bitcoin along with a couple of new top-rated trading platforms for shorting.
Shorting the market can be tricky but if you follow my tips and use a top crypto broker that allows short-selling you may go a long way.
I believe that every trader needs to be able to trade both ways to maximize profits.
So pick your favorite trading platform above and read through my tips and experiences to learn more about how to short bitcoin.
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No, Coinbase does not allow short-selling for their cryptocurrency trading pairs.
Shorting BTC means that you bet on a negative movement in the market. If you open a short position and the market falls in price, you will make a profit from the decline.
Simply choose any of the trading platforms listed in this review, create an account and follow my step-by-step guide on how to short bitcoin.