The one thing that I love about Forex trading is the ease with which you can play shorts & longs in any given FX pair on any given day. The higher volatility of Forex provides multiple opportunities to trade on both sides without any complications. In stocks, you can short stocks too but it is a little more complicated & considered risky. Finally we come down to Cryptos, where shorting in much less unheard of & most people only trade one way which is to buy the Cryptos & pray on their lucky stars that they go to the moon!
It is pretty common knowledge that Bill Gates is not a huge fan of Bitcoin & Alt.coins. His statement a couple of weeks ago in an interview was a stark reminder of that, “I agree I would short it if there was an easy way to do it,” he said. Surprised to see that the co-founder of such a forward looking IT giant has such limited knowledge about Bitcoin & Cryptos… turns out there is not one but several easy ways to short Bitcoin.
Let’s touch up on them briefly for people who still don’t know since Tyler Winklevoss (early Bitcoin investor & owner of Gemini exchange) already tweeted to Gates one way which he can short Bitcoin.
- Margin Trading: The easiest way that most traders know to shorting a security, which in this case would be Bitcoin borrowed from a broker in expectation of its price going down & than buying back at a lower price making a profit. Popular exchanges like BitMex, Bitfinex, eToro, Karaken & Poloniex all offer this feature.
- Futures: Chicago Board Options Exchange (CBOE) launched the Bitcoin Futures last December at the zenith of Crypto mania. The Futures give you the ability to buy or sell contracts based on which way you think the price will go. In this case you would be selling Future contracts if you are looking to go short on Bitcoin.
- Option Spreads: A very popular strategy when trading stocks where you want exposure to both the long & short sides of a trade. The same can be applied to Bitcoin. North American Derivatives Exchange (Nadex) offers Bitcoin spreads where the gains & losses are predefined so you don’t have to lose any sleep over it. Basically you know what you are going to profit or lose before entering a trade.
- Bitcoin Investment Trust (GBTC): This is an Over the counter product trading on OTC exchange & backed by actual Bitcoins, directly tracking the price of Bitcoin. However, keep in mind this is a risky product (buying or selling) considering the price volatility of Bitcoin with GBTC usually trading at a massive premium to the price of the Bitcoin.
- Blockchain related Stocks: Not specific to Bitcoin but if you are generally bearish on the Cryptos you can short these stocks which are directly or somewhat linked to the performance of the digital coins. Stark examples in this case are RIOT & LFIN with OSTK to a lesser extent.
Before I wrap up, just want to quickly share the results of my weekend Twitter poll where people still coined Bitcoin as the kingpin of Cryptos! Interesting to see that the percentage of people’s favorite e-coin is pretty close to BTC dominance in the Cryptoverse which stands around 37% as of today.
Feel free to comment or provide any feedback.