Bitcoin attracts many investors to the market who have not yet had much experience with trading. Through the constant reporting of course many people become attentive to the cryptocurrency. They assume that a fast net yield can be made. However, as soon as investors concern themselves somewhat more with the topic, uncertainty arises.
What would happen if Bitcoin suddenly fell in price? What happens if an owner of a large number of Bitcoins decides to put them all on the market at once? How can I benefit? The only way seems to be to go short in Bitcoins. In order to check whether this possibility even exists and makes sense, it is worth getting an overview of the importance of short and long.
Going Long – What Is It?
Those who are active on the stock market will sooner or later be faced with the question of whether they want to go long or short. If it is decided to go long, then the investor would like to receive a profit with rising prices. He is betting that the securities will continue to rise in price. If this is the case, then the own account fills up. The explanation is quite simple here. If an investor buys a share, he automatically goes long. He hopes that the value of the share will rise. A further possibility is it to go here an indirect way. In this case, investors decide to invest in derivatives. If the underlying assets rise, the profit will also rise.
Going Short – What Is That?
It becomes interesting in connection with wanting to bet on falling bitcoins when you read the explanation of what it means to go short. Going short makes it possible to make profits yourself when prices fall. In this case, for example, you can go short with stocks. This is a short sale. Shares are offered which the provider does not own at all.
If one assumes that the share falls, one can sell these at a price. If price actually falls, the short position is closed and a profit can be made. So there is speculation that the stock can be bought at a low price when the price falls and thus make a profit. If the share is offered as a short sale for 60 Euros and falls to 40 Euros, then the share can be bought, the investor has made a plus of 20 Euros.
If the short is made with derivatives, there is speculation on falling prices. In this case, profits can be achieved if this fall actually occurs. You can read more about Bitcoin shorting on www.bestbitcoinbroker.net.
Note: Some people also speak of call and put. A call is a long, a put is a short.
Shorting Bitcoins – What Are The Possibilities?
If you have followed Bitcoin’s share price trend a little, you will soon see that it can be expected to increase in the future as well. While the crypto currency was still at a low four-digit rate at the beginning of 2017, by the end of 2017 it was even moving in the direction of 10,000 euros. This is an impressive increase that ensures that the news is full of the successes of the digital currency. Nevertheless, there are people who are thinking about betting on falling Bitcoins.
Why is this thought coming up? Experts speak of a bubble that is building up more and more and could burst at some point. A large problem is above all the distribution of the Bitcoins. People know that relatively many Bitcoins are already in circulation. However, here it is even similar to the banks, because also at Bitcoin there are the so-called Big Players.
Around 93% of the owners share an amount of 3% of the Bitcoins in circulation. The remaining part is distributed over around 7%. A projection quickly shows that only a small number of investors have a very high amount of Bitcoins in their own wallets. This is actually nothing new, because even with the real currency the distribution seems to be relatively unequal.
However, this information becomes interesting when investors think about whether it is worthwhile to become active in Bitcoins shorting. If only a small proportion of people who have a large amount of Bitcoins decide to bring a large number of digital currencies onto the market, this can lead to a sharp drop in prices. Then the bursting of the bubble is possible every day. So it’s not wrong to think about how you can benefit from a possible fall in prices.
What Is The Risk Of Shortening Bitcoins?
The decision has been made and Bitcoin shorting should ensure that you can make a profit in the event of a price drop. But is this even possible with a cryptocurrency? The problem is that Bitcoins cannot simply be traded on the stock exchange. Instead, the normal process is to invest in the cryptocurrency yourself and fill a wallet. In this context, however, relatively high amounts must be used. In addition, rising prices are then used. Who would like to short now however, that can use different ways:
Working With Margin
Cryptocurrencies, such as Bitcoin, are very popular and so it was only a matter of time before it was finally made possible to trade margin on various platforms. In this variant of trading, money is borrowed by the broker, so to speak. If you want to short BTC, you can borrow money from the broker and open a short position. How high the leverage is depends on the offer.
There are relatively small levers, but very high levers are also offered. In this case it is not absolutely necessary to own Bitcoins yourself. The advantage of margin trading is that high profits can be generated. However, these are also associated with the risk of high losses. If the price should not fall, then in this case far more than only the loss of the own employment is to be expected. Instead, the investor must reimburse the amount he borrowed from the broker. This can quickly reach utopian heights. Therefore, newcomers to margin trading should be cautious and not take too high a risk.
Bitcoins – What Is The Goal?
Some of the risks associated with Bitcoins shorten have already been mentioned. This is, of course, first and foremost the possibility of losing your stake. The amount of the stakes is determined by the trader himself, so this risk can still be calculated quite well. It becomes more difficult the moment you decide to work with a lever. The lever makes very high profits possible, but it also ensures that high losses can occur. Those who are not able to compensate for these losses run the risk of accumulating a large mountain of debt.
The market is not so easy to assess either. When Bitcoins was launched in 2008, only a few people expected the share price to rise as sharply as it does today. Rather, the digital currency was given only a short life or pointed out that it is likely to go down well with lovers in the first place. The lovers who invested right from the start have already become rich if they have kept their Bitcoins.
However, as the exchange rate rises, it becomes increasingly difficult to assess how the currency will develop. So going short in Bitcoins is always a risk that should not be underestimated. This also applies if you decide to go long in Bitcoins. Digital currencies are not a safe investment, but they are an investment with which you can make a high profit.
Note: You entire trading capital should never be placed on Bitcoins. Risk sharing is highly recommended at any point. Only that way possible losses can be balanced.
Where Will Bitcoin Trading Take You?
If you are thinking about an investment, you may be wondering where Bitcoin’s journey will take you. To take a look into the future, it makes sense to first go back in time. The power of banks has long been a thorn in the side of many people. They want alternatives to the classic currencies. They are annoyed by the fact that it is difficult for them to avoid inflation and thus have no opportunity to lay their own hands on their money. With the development of the digital currency, an alternative should be created. The official site of Bitcoin is by the way bitcoin.org.
What began as a science fiction idea has finally taken shape through Bitcoin. The digital currency is designed in such a way that customers have the opportunity to dig for Bitcoins themselves in a system. It does require some technical prerequisites. However, those who have these prerequisites and are familiar with the technology have a good chance of filling their wallet.
Bitcoin should therefore be able to completely replace the real currency. More and more companies are being won over for this, who accept a payment with Bitcoin. As acceptance increases, so does interest in Bitcoin. This is another important factor when observing the market. In the meantime the banks have already become aware of the cryptocurrency and are increasingly beginning to see it as a danger. This also influences the value of the currency.
To want to set Bitcoins short is a thought that has already come to some investors. However, in the past it looked as if this concerns an undertaking, which is relatively senseless. The price always seems to be rising. However, if you take a detailed look at the price development and look at the various expert opinions, you can see that a falling price is not so unlikely. In the meantime, various options have developed that offer an option to shorten bitcoins. These are associated with a quite high risk. However, it can be worthwhile to take this risk and generate a high return in this way. This requires not only market knowledge and capital, but also luck.