Shorten the Bitcoin – this is not necessarily only interesting for Bitcoin skeptics. Even stocks that have remained stock market favorites in the long term have occasionally put significant setbacks on the trading floor in the past. After every rocket launch, prices run hot at some point. But there is no reason to sit idly by and wait out the crash or even to realize losses. After all, profits can also be generated from price setbacks. “Bloomberg” recently published a list of possibilities how Bitcoin can also be shortened.
Bet against Bitcoin with CFDs
So-called Contracts of Difference, CFDs for short, belong to the world of derivatives. This is therefore a paper that reflects the Bitcoin price, but the trade is not based on “real” Bitcoins. Anyone who trades a CFD basically makes a bet with their broker. In this way, investors can speculate that the Bitcoin will fall – or rise – in the future.
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- As with all derivatives, there is a risk for investors in CFDs that should not be underestimated, because this type of investment is highly speculative.
- If you lose your bet with the broker like kraken – the Bitcoin, for example, does not fall – this could be accompanied by the loss of your invested capital. You should therefore exercise particular caution before concluding the contract.
- In general, brokers and investors are free to agree on the values underlying the CFD. In addition, CFDs involve the so-called issuer risk. If your broker becomes insolvent, investors can suffer a total loss.
Bitcoin margin trading
Margin trading is a futures contract that is already offered by some Bitcoin exchanges such as Bitfinex. With this type of investment, investors must pay a portion of the traded value in advance as collateral. The more volatile, i.e. riskier, an underlying asset is, the higher this requirement is. With the fluctuating Bitcoin price, the margin requirement is correspondingly rather high.
Trade with Bitcoin Futures
The launch of a Bitcoin future by the Chicago Derivatives Exchange (CME) has initially provided an additional boost to the Bitcoin price, as this is a major step towards further acceptance of Bitcoin in the market. Among the derivatives, futures belong to the area with the highest regulation. With a Bitcoin future, you can bet on a specific Bitcoin value at a specific time in the future.
Exchanged Traded Notes
Similar to Exchange-Traded Commodities, or ETCs for short, ETNs are derivatives that reflect the market value of a specific underlying asset, such as Bitcoin. Unlike ETCs, however, ETNs are not collateralized with the original underlying asset, which means that you are not trading “real” Bitcoins. Vontobel has already launched its first Bitcoin ETN, which can be traded on the SIX Swiss Exchange, since mid-November. Investors can choose between long and short options that allow them to participate in either a rising or falling Bitcoin price.
Borrow and resell Bitcoin
It is already possible on some Bitcoin exchanges like Bitfinex. Here, investors can borrow assets temporarily and arrange repayment at a later date. In doing so, investors speculate that the assets, in this case Bitcoins, will be cheaper at the agreed repayment time – the classic short-selling method.
Away from the crypto-currency market: Shorten Bitcoin shares
If you want to participate in the Bitcoin course but avoid the still rather unknown area of the crypto-currency market, you can also do so via the detour of shares linked to Bitcoin. Chip manufacturers like NVIDIA are closely tied to the Bitcoin price and behave similarly. The advantage for investors is that they can follow familiar paths and do not have to move around the Bitcoin exchanges if they want to shorten the “Bitcoin shares” and bet on falling prices. The security aspect is also not to be disregarded here: Even if the price of these shares is influenced by a falling Bitcoin, it is not certain that the share price will necessarily move just as extreme, since other factors also play a role here. In this way, possible misspeculations and losses could be mitigated.
The bottom line is that a profit from a possible Bitcoin crash is quite possible for investors, but not without risk. Anyone speculating on falling prices should therefore sound out the risk of the intended investment well and have the best possible market knowledge.