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Bitcoin shortening - have you come across the term that someone is sorting 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 a profit from falling prices.

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Bitcoin shortening - earning 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 assume the so-called short, i.e. a short position. If we have bitcoin and we predict that its price will drop, we naturally sell it - we close our long position, the so-called longa. What if we do not have bitcoin and we want to profit from the decline in its valuation? Then we have to take a short position, which is just bitcoin shorting. How it's working?

We can say that We "borrow" bitcoin and then sell it with a necessity to buy it back. 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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