Going Short: How Traders Profit From a Declining Cryptocurrency

TL;DR

Most cryptocurrencies experience extended periods of decline during a bear market, and can even draw down in value in a bull market. Because of this, traders opt to trade on the short side — predicting which cryptocurrencies will decline in value and netting a potentially handsome profit if correct.

With that in mind, we’ll take a look at seven methods that traders use to short a cryptocurrency.

• Trade Short/Inverse/Down Tokens - Short (also known as inverse or down) tokens are by far the simplest way to profit from a declining cryptocurrency. These are tokens designed to move in the opposite direction to an underlying cryptocurrency.
• Prediction Markets - Cryptocurrency prediction markets are platforms that allow users to wager on the outcome of future events, such as the Bitcoin price reaching $100,000 by December 31, 2024.
• Contract for Difference - A contract for difference, or “CFD” is a powerful financial instrument that allows traders to capitalize on cryptocurrency price movements by going either long or short.
• Binary Options - Cryptocurrency binary options are simple financial derivatives that allow traders to make a prediction on whether they believe an asset will go up or down in value by a specified time and date in the future.
• Margin Trading - Margin trading allows traders to borrow funds from a third party (such as the exchange or a liquidity provider) to open larger positions than their balance otherwise allows using leverage.
• Perpetual Futures - Cryptocurrency futures are a type of financial derivative contract that entitles the holder to buy or sell an asset at an agreed price at an agreed date.
• DeFi Short Selling - The concept is nearly identical to margin trading, as in that you borrow the cryptocurrency you want to short, sell it, then rebuy it at a later date (and hopefully lower price) to pay off your loan. But instead of using a broker, you take out a loan using one of the myriad DeFi lending platforms.

What’s your take on this? 😉

More details here: https://coinmarketcap.com/alexandria/article/going-short-how-traders-profit-from-a-declining-cryptocurrency