Bitcoin Shorting: Key Factors to Consider
People who have invested in Bitcoin feel some risk at their back end that it will crash someday in the coming future. One of the proper methods to sort out this problem is by shorting Bitcoin. One can find several methods and platforms that can help you shorten Bitcoin. The idea is now increasingly possible and is becoming a critical area in the mainstream financial world. In this write-up, we are talking about some of the critical factors that can help in making things work. If you are keen on discussing this topic in detail, you can explore how to prevent hype from influencing crypto investment decisions . Meanwhile, we will now check the key factors that help in going ahead with Bitcoin shorting in the following paragraphs:
Table of Contents
The Key Factors
Bitcoin shorting is one of the critical strategies linked to Bitcoin, and it comes up with too much risk. The below is the list of some important ways of shorting BTC.
Volatile nature of BTC Price
We can see the memes regarding the price of BTC volatility seemed to have gone old. However, these remain very much relevant. Most destinations will help short Bitcoin, and it relies on derivatives. All these derivatives are seen working on the pricing of BTC. The digital currency price seems to have a domino impact over investors’ gain and the same losses. For instance, BTC is seen mimicking the spot cost changes. It simply means that one cannot employ the hedge that comes with the actual BTC investment. At the same time, you have different options to trade BTC, and one can even help boost up the losses owing to the volatility issue of the digital coin.
Bitcoin as a Risky Asset
Price is regarded as one of the key risks that would help evaluate when it comes to short BTC. When compared to other assets, Bitcoin remains at the nascent stage. The coin has come along for the past 13 years. Hence, we have sufficient info for the investors willing to carry out the educated decision regarding the feasibility or workings of an asset. For instance, one can find many more issues linked to BTC forks that remain unresolved. Though many more established platforms linked to CME are seen coming with BTC forks, they remain unaddressed when coming along with the CME option that tends to remain an assured implementation for BTC derivatives.
BTC Regulatory Status
It comes with excellent global coverage, the regulatory status of BTC all over the geography is still not very much evident. Many more leading platforms for BTC trading like Okex, Ftx, and Deribit remain available to many US-based investors. With the absence of proper regulation, one can find too many exchanges that can help come along with several offerings and help get the proper oversight. For instance, Binance can be seen coming along with 125 percent of leverage for BTC futures trade added in the recent past. Also, there is a lack of clarity in the regulatory status that adds up the legal course of action for the consumers.
Proper Order of Knowledge
Before you plan to consider any short position in Bitcoin, one needs to brush up over the various aspects of the same. These include knowledge regarding the various types of order. In addition, one can even help limit the losses that can come along with the price trajectory that seemed to come along in the direction one can think of initially starting up. For instance, with the help of employing a particular stop to limit orders, one can even think of trying the trading derivatives that are further going to reduce the losses.
Now the big question is whether it is possible to shorten Bitcoin. Well, the answer is yes; one can quickly reduce the volatile cost of Bitcoin with the help of betting against employing the derivatives, including the options and futures. But at the same time, it is vital to count upon the risks linked to this process. One popular option of doing so with BTC is trying derivatives. For instance, you can even think of using the choice for betting against the price of digital coins. Furthermore, you can even leverage the platform of Bitcoin in a big way using exchanges.