How to Short Bitcoin Without Leverage

. 6 min read

For any trader, there are always times they will want to short an asset they are actively trading, even bitcoin. Especially traders that have their eyes on trading shorter time frames or assets with colossal growth over time like bitcoin have shorting opportunities from time to time.

However, many people would like to be able to short bitcoin without margin trading. For example, perhaps there is a world event that you think will negatively affect the bitcoin price or some bitcoin news you are concerned about. In any case, you have other options to reduce your exposure to bitcoin price drops without having to use margin trading or exiting cryptocurrency completely.

What is Shorting?

Shorting, short-selling, or placing a short generally describes when a trader or investor borrows cryptocurrency or other assets like stocks and sells them to ideally repurchase them at a lower price point and repay what was borrowed. If the short does go how you expected, the market price will drop, and you will end with a profit at the end of a trade; if it goes against you, you'll have to exit the trade for a loss or, worse yet, a liquidation in some cases. Margin trading and using leverage to short bitcoin and other assets can be risky, especially with the volatile nature of bitcoin and other cryptocurrencies.

bitcoin short position

How to Short Bitcoin?

Often traders will use margin exchanges or trade bitcoin futures contracts to short bitcoin. However, this can involve a learning curve and a level of risk that many traders aren't comfortable with and can opt for some alternative ways to short bitcoin by exchanging or selling bitcoin. To avoid the risk of liquidation, there are alternatives to short-selling bitcoin that take a different approach.

Ways to Short Bitcoin Without Margin

While a little different, you can reduce your exposure to the price of bitcoin if you consider it a good idea without using leverage. Suppose you are someone that already holds bitcoin when you reduce your exposure. In that case, you can repurchase it later, providing a similar potential outcome to using a margin exchange to short sell bitcoin. While you can't use high leverage to amplify this type of trade, you also reduce the risks of the trade going against you as severely. Of course, you are still exposed to the volatility of the market. Still, you wouldn't be at risk of liquidation that typically comes with bitcoin shorts using leverage or potentially losing more than you invested with CFDs.

ways to short bitcoin

Stablecoins:

Tether (USDT), USDCoin (USDC), TrueUSD (TUSD), Dai (DAI), and other stablecoins provide a way to reduce exposure to the price of bitcoin without having to trade bitcoin futures contracts or trade using leverage. Stablecoins vary in some ways, but the typical dynamic is that they aim to be pegged to the value of a traditional asset that is considered to be more stable. For example, some stablecoins aim to be pegged closely to the price of the USD, EURO, GBP, or other assets like gold. You can exchange your bitcoin for stablecoins as one of the ways to short bitcoin.

Cash Out Bitcoin or Sell Bitcoin for Cash:

While this would require you to sell some bitcoin if you do it using P2P trading, you can often profit from doing so while allowing you to step to the side for a little while waiting for what you expect could be a lower price. How to cash out bitcoin? Using LocalCoinSwap, you can trade worldwide with a vast range of payment methods, including cash-in-person, cash by mail, and cash deposit. If you want to wait for what you think will be a lower market price, you can use P2P trading to do just that.

Altcoins:

If you believe that a particular altcoin may outperform bitcoin, short-selling your bitcoin by buying altcoins is an option. While, again, this is a bit of a leap from the conventional ways to short bitcoin, it does provide you with some reduced exposure to bitcoin. However, the broader cryptocurrency market is often affected by bitcoin price movements, so when considering selling bitcoin to take up a pseudo-short position, it is worthwhile to recognize that and look at past market activity. Even though past behavior isn't a guarantee of future behavior, you can use this as a way to see what kind of effect a bitcoin price drop may have on an altcoin you are interested in holding.

P2P Trading:

During flat periods in the market with lower volatility, you can make money or temporarily reduce your bitcoin exposure by trading P2P on LocalCoinSwap. While aggressive day trading on short time frames may not be for you, you can avoid short selling and instead sell bitcoin P2P. Additionally, suppose you can access more in-demand payment types or more commonly accepted methods. In that case, you can make a profit and use these gains to perhaps act as a hedge or buffer for your portfolio during a slight drop in bitcoin price later.

Going Long on Bitcoin by Buying More Bitcoin

Suppose you aren't comfortable trading cryptocurrency with leverage, exchanging, or selling any of your bitcoin but would like to improve your holdings. In that case, you may want to consider averaging down your buy-in price. Then, when the market dips, you can increase your holdings by grabbing a little extra bitcoin, and this effectively lowers your average buy-in price if you have bought higher than the current market rate (or have on average).

If you expect the bitcoin price to increase on average over time, you can also use the dollar-cost averaging approach to buying and holding bitcoin. To do this, you simply acquire more bitcoin at regular intervals rather than more copious amounts at once. Dollar-cost averaging reduces the current price's effect on you at any particular time and will average out to match the longer-term trend in price, be it during a bull or bear market.

going long on bitcoin

Short Sell Bitcoin with CFDs?

CFD is an abbreviation for the phrase "contract for difference." Instead of borrowing to sell bitcoin as you would on some exchanges that support trading bitcoin with margin, you instead agree to pay the difference when you end your trade. If it goes against you, you pay up or receive profit if your trade goes well. CFDs are commonly used when trading traditional assets and are one of the things that have rolled over into cryptocurrency trading. Like trading bitcoin with margin, the significant risk of trading CFDs is when you lose on a trade.

The problem with CFDs, in particular, is you can often lose more than you originally invested, making them not an ideal trading method for beginners or those not comfortable with risk management. Trading bitcoin with CFDs can seem enticing as you may only have to put down a tiny percentage to start, but as previously mentioned, this can go against you and leave you in a bad spot. If you are considering trading bitcoin CFDs, be sure you fully understand the risks and how the trading process works.

Going Long or Short on Bitcoin P2P Trading

Whether you think bitcoin is going to continue to rise or you think perhaps it will struggle and are considering shorting bitcoin, you can use P2P trading to buy and sell bitcoin your way. Whether you have limited access to payment methods, are in a location that is hard to find bitcoin traders, or simply prefer to trade P2P, then LocalCoinSwap can help. With over 300 payment methods and a range of digital assets to trade, you can move with the market, accumulate as much as you need, or cash out bitcoin to your bank account or just about anywhere else. Traders worldwide look to P2P trading as a way to get involved with the bitcoin market or make money trading cryptocurrency as their own business.

Sometimes keeping things simple is the best way to trade bitcoin. If you want to short bitcoin by reducing your holdings or long bitcoin by buying more today, get started by signing up to LocalCoinSwap.