Shortening bitcoin - did you meet with the statement that someone shortens a given cryptocurrency or has a short position on it? This term should not be confused with the length of the investment. A short position is not a short-term investment, but earning a price decrease.

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Shortening bitcoin - making money on price drops

We distinguish short and long positions on traditional and cryptocurrency stock exchanges. Long position is a game at a price increase. We buy bitcoin cheaper and sell more expensive. We earn on the difference between the purchase price and the sale price. It is quite natural that we will earn if something that we bought cheaply, sell for a higher price.

However, we can also set up the so-called shorta, or short position. If we have Bitcoin and we predict that its price will fall, we naturally sell it - we close our long position, so-called. longa. What if we do not have bitcoin and we want to earn a drop in its valuation? Then we have to set up a short position, which is just bitcoin shortening. How it's working?

We can say that We "borrow" bitcoin, and then sell it with the necessity of redemption. If the price of Bitcoin drops, we will buy Bitcoin cheaper and the difference in price will be our earnings. If the price increases, we will be forced to buy it more expensive and lose money.

Shorting bitcoin and other cryptocurrencies is still possible on a few stock exchanges. Some of them do not sell physical cryptocurrencies, but futures contracts. Then bitcoin shortening takes place without bitcoin. We buy contracts valued similarly to real bitcoin. So in this case, the bitcoin shortening is a bit like betting on which way the price will go.

The most popular stock exchange for playing shorts on cryptocurrencies is Bitmex market.

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Investments in OTC market instruments, including currency exchange rate (CFD) contracts, due to the use of the leverage mechanism, entail the possibility of incurring losses exceeding the value of the deposit. It is not possible to make a profit on transactions on OTC instruments, including currency exchange contracts (CFDs) without risking a loss, therefore contracts for exchange differences (CFDs) may not be suitable for all investors.

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